ECB’s Vujcic calls June rate hike ‘robust’ as inflation persists

ECB Vice President Vujcic Defends Rate Hike as “Robust” Amid Persistent Inflation

The European Central Bank’s decision to raise interest rates by 25 basis points on June 11 was “robust” given that inflation is expected to remain elevated for longer, ECB Vice President Boris Vujcic said on Tuesday in London.bloomberg

Vujcic noted that most long-term inflation expectations remain aligned with the ECB’s 2% target and that current wage growth does not suggest second-round effects. The comments came as the euro fell to its lowest level since June 2025, pressured by weak economic data and dovish remarks from ECB President Christine Lagarde that led investors to pare back expectations for further rate increases.bloomberg

The June Rate Decision

The ECB’s Governing Council raised all three key policy rates on June 11, lifting the deposit facility rate to 2.25%, the main refinancing rate to 2.40%, and the marginal lending facility rate to 2.65%. The move marked the first rate increase in nearly three years, driven by rising energy costs linked to the conflict in Iran, which pushed eurozone inflation to 3.2% in May.morningstar

The ECB also raised its 2026 inflation projection to 3.0% from the 2.6% forecast in March, and lifted its 2027 outlook to 2.3%. According to Reuters, the hike had been widely telegraphed, with more than 90% of economists surveyed expecting the move.europa

Euro Under Pressure

The EUR/USD pair dropped as much as 0.5% on Tuesday to a session low of $1.1376 after PMI data showed contracting private-sector activity in Germany and France. The cost of hedging against euro declines over the next year has surged to its highest level since March 2025.bloomberg

Markets are now pricing in roughly a 50% probability of another rate hike in September, with BNP Paribas Asset Management expecting two total increases this year followed by an extended hold through 2027.euronews

What Comes Next

The ECB’s next policy meeting is scheduled for July 22-23, with the September 9-10 meeting seen as the more likely window for any additional tightening. Vujcic’s defense of the June decision suggests the Governing Council remains comfortable with a gradual approach, even as Lagarde’s more cautious tone introduces uncertainty about the pace of further moves.equalsmoney