European Central Bank (ECB) Governing Council member and Governor of the Central Bank of Malta, Alexander Demarco, stated during the European trading session on Friday that the ECB will probably need to hike interest rates at its June policy meeting [1]. Demarco emphasized the importance of the ECB maintaining its commitment to the 2% inflation target to preserve credibility, noting that medium-term inflation expectations remain well anchored and there is not much evidence of indirect inflation effects at present [1].
Demarco also highlighted that the ECB’s meeting-by-meeting approach remains valid and that, currently, he does not see the need to go too far on rates [1]. He indicated that the inflation outlook for 2026 is likely to be revised higher, and that upcoming projections will determine whether a single rate hike will suffice or if further increases are necessary [1].
In terms of market reaction, the EUR/USD currency pair saw a marginal recovery from 1.1596 to near 1.1606 following Demarco’s comments, though it remained 0.1% down as of the time of reporting [1].
CONCLUSION
ECB’s Demarco signaled a probable rate hike in June, citing a likely upward revision to the 2026 inflation outlook and the need to maintain policy credibility. The market response was muted, with EUR/USD showing only a slight recovery but remaining lower overall.