European Central Bank Vice President Luis de Guindos said the bank must consider weaker euro-area growth when deciding on an interest-rate move in June [1].
This caution comes as the ECB faces a complex balancing act between controlling inflation and preventing a deeper economic slump. The warning suggests that the bank may pivot away from aggressive tightening if data continues to show a downturn in economic activity.
De Guindos said the slowing growth is due to the ongoing Iran war and the resulting energy shocks [1]. He said these factors are weighing heavily on both the inflation outlook and the general economic trajectory of the euro area [3].
According to de Guindos, current data suggests a cooling economy. "If you look at soft indicators, sentiment indicators, these indicators clearly point at an important impact on growth," he said [1].
The Vice President said the bank should avoid rushing into further tightening while the economic picture remains volatile. "We need to be prudent on a June rate hike as growth data is expected to deteriorate," de Guindos said [3].
The ECB is scheduled to hold its policy meeting in June 2026 [1]. The decision will be made in Frankfurt, Germany, where officials will evaluate whether the risks to price stability outweigh the risks of a recession, a critical junction for the region's financial stability.
De Guindos' comments signal a potential shift in the internal consensus of the ECB. While the bank has previously focused on curbing inflation, the reality of energy supply disruptions caused by the conflict in Iran is now forcing a reconsideration of the growth forecast [1], [3].
“"We need to be prudent on a June rate hike as growth data is expected to deteriorate."”
The ECB is facing a 'stagflationary' environment where energy prices rise due to geopolitical conflict while economic growth slows. If the bank raises rates to fight this inflation, it risks deepening a recession; if it holds rates steady to support growth, it may allow inflation to become entrenched. De Guindos' emphasis on 'prudence' suggests the ECB may prioritize economic stability over aggressive inflation targeting in the coming month.
