The ECB is preparing to raise rates amid the energy crisis and the war in the Middle East

The European Central Bank is likely to raise interest rates again as early as June, amid the ongoing energy crisis and rising inflationary pressure in the eurozone. This was stated by ECB Executive Board member Isabel Schnabel in an interview with Reuters.

According to Schnabel, even a possible rapid de-escalation of the conflict in the Middle East would not remove the need to tighten monetary policy. She stressed that the global economy has already suffered significant damage due to disruptions in energy supplies and the breakdown of global logistics chains.

«Based on the current data, an interest rate hike in June appears necessary», — the ECB representative said.

Financial markets expect the European Central Bank to raise its key rate by 25 basis points at the June 11 meeting. The main reason remains the rise in energy prices, which is once again fueling inflation in eurozone countries.

The ECB is also concerned that higher energy prices are beginning to spread to other sectors of the economy. Schnabel warned of signs of so-called «secondary inflationary effects», when rising prices affect a broad range of goods and services.

At the same time, the European Central Bank acknowledges risks to the economy. High rates could further slow economic growth amid geopolitical instability and deteriorating consumer sentiment.

At its June meeting, the ECB will present updated inflation and economic growth forecasts, including baseline and crisis scenarios for the eurozone economy. These assessments will be key to the regulator's further decisions.

Experts note that a possible rate hike could make loans and mortgages more expensive for households and businesses across Europe, including Cyprus.