ECB: War-driven inflation keeps hikes in focus – Nomura

May 11, 2026 fxstreet.com

⦿ Executive Snapshot

What: ECB is likely to raise interest rates in June and July 2026 due to inflation driven by the US-Iran war.
Who: Nomura's George Buckley and team provide insights on the ECB's potential rate hikes.
Why it matters: Higher energy prices are expected to push Euro area inflation above target, influencing monetary policy decisions.

Nomura expects two ECB rate hikes in June and July 2026, moved up from an original forecast of 2028.
Inflation in the Euro area is anticipated to exceed target levels in H1 2026 due to the ongoing Iran war.
The reliance of the Euro area economy on energy imports is expected to dampen growth amidst rising energy prices.
The ECB may still proceed with a June rate hike to signal its commitment to controlling inflation expectations.
There is speculation that a resolution to the US-Iran war may not prevent the ECB from raising rates as planned.

Historical reliance on energy imports in the Euro area has consistently made the region vulnerable to external shocks, impacting inflation and economic growth.
The current conflict has escalated inflationary pressures, creating a challenging environment for the ECB's monetary policy objectives.

Immediate market consequences may include increased volatility in Euro area financial markets as rate hike expectations shift.
Long-term implications could involve a reevaluation of energy dependency strategies among Euro area countries to mitigate future inflation risks.

Regulatory risks include potential backlash against ECB's rate hikes if economic conditions worsen due to sustained high energy prices.
Competition from other economies may influence the effectiveness of ECB's monetary policy in stabilizing inflation.

Key milestones to watch include the actual rate announcements in June and July 2026 and their impact on inflation metrics.
Future developments regarding the US-Iran war and energy prices will be critical in assessing the ECB's monetary policy direction and market reactions.

What is driving the expected interest rate hikes by the ECB?

The expected interest rate hikes by the ECB are driven by inflation resulting from the US-Iran war.

When does Nomura predict the ECB will raise interest rates?

Nomura predicts that the ECB will raise interest rates in June and July 2026.

Why is inflation in the Euro area expected to exceed target levels?

Inflation in the Euro area is expected to exceed target levels due to higher energy prices influenced by the ongoing Iran war.

Who provided insights on the ECB's potential rate hikes?

Insights on the ECB's potential rate hikes were provided by Nomura's George Buckley and his team.