Lagarde’s Inflation Signal Lifts Expectations of Possible ECB Rate Increase in June

European Central Bank President Christine Lagarde has signaled that the ECB’s March inflation forecasts for 2026 are likely to be revised upward at the central bank’s June meeting, strengthening market expectations that policymakers could raise interest rates as early as June.

Lagarde said earlier this week that the economic situation had changed materially since the previous forecasts. Her remarks echoed the tone of other Governing Council members and focused attention on the ECB’s June 11 rate decision.

The reassessment comes as policymakers monitor the inflationary impact of geopolitical tensions, including the Strait of Hormuz situation and its potential effect on energy prices. If current trends persist, the research summary said, a June rate increase may become difficult for the central bank to avoid.

The issue places the ECB in a familiar bind: higher energy prices can lift headline inflation even as tighter monetary policy risks weighing on growth. A formal upward revision to inflation projections would give markets a clearer signal of how the Governing Council is balancing those risks.