ECB’s Wunsch: Would need stronger second-round effects to justify further tightening

The remarks from European Central Bank (ECB) policymaker and the head of Belgium's central bank, Pierre Wunsch, released by Econostream during the European trade on Wednesday, have signaled that he is not in favor of further monetary policy tightening.

In the June policy meeting, the ECB hiked its policy rates by 25 basis points (bps), the first one seen since September 2023.

Additional remarks

Any inflation surprise before the July meeting more likely on the downside.

Oil prices could fall below pre-war levels.

Most oil production capacity should be restored within a quarter if conflict is over.

One hike could be enough if shock fades before significant second-round effects.

More than one hike to depend on more persistence and stronger second-round effects.

Market reaction

The Euro (EUR) didn't react immediately to ECB Wunsch's remarks. At press time, EUR/USD trades 0.22% lower to near 1.1395.