The European Central Bank faces a dilemma: Middle East conflict has driven up energy prices while Eurozone inflation remains persistently above target; surging oil prices are dragging down economic forecasts, leading to downward revisions in growth prospects.
A Reuters survey conducted from April 17 to 23 among 85 economists found that more than half of respondents expect the European Central Bank to hold interest rates steady on April 30, followed by a 25-basis-point increase in the deposit rate to 2.25% in June. This assessment marks a significant shift from the end of last month, when most economists still expected rates to remain unchanged throughout the year.
Inflation data is the core driver behind this shift in expectations. The Eurozone inflation rate jumped from 1.9% last month to 2.6%, far exceeding the 2% target, and financial markets have already priced in more than two rate hikes. Simultaneously, soaring oil prices have suppressed corporate and consumer confidence, leading to downward revisions in economic growth expectations. Against this backdrop, a rate hold in April has become market consensus; however, if oil prices continue to stay above the $100 threshold, the ECB may be forced to launch a &#34;preemptive rate hike&#34; in June.
<h2>April Rate Hold Likely, June Hike Remains Divisive</h2>
Among the 85 economists surveyed, 84 expect the European Central Bank to maintain interest rates unchanged on April 30, showing near-universal consensus. However, the outlook for June is divided: 44 predict a rate hike to 2.25%, while 40 expect a hold, leaving both camps evenly matched.
Ruben Segura-Cayuela, Head of European Economic Research at Bank of America, stated that the ECB is striving to avoid the fate of being forced to reverse course after its 2011 rate hikes. &#34;They need to confirm that once they raise rates, they won't have to withdraw them quickly. That is precisely why they are choosing to act in June rather than April.&#34; He simultaneously warned that if the economic reaction turns out worse than expected, it could provide grounds for delaying the hike, noting, &#34;Once delayed, there may come a point where no further hikes occur.&#34;
ECB officials have signaled a firmer stance against inflation compared to their counterparts but have downplayed the likelihood of an immediate rate hike, citing a lack of sufficient evidence that energy costs are spreading to broader price areas.
<h2>Path Beyond June Unclear; Second-Round Effects Are Key</h2>
Regarding policy direction beyond June, there is a lack of consensus among economists. Of the 85 respondents, 34 expect at least one more rate hike before year-end, while over 40% (35) still anticipate no rate changes for the entire year.
Anna Titareva, a UBS European economist, holds a hawkish view, arguing that the ECB has no room to wait. &#34;If second-round effects truly manifest in the data, it will already be too late. This is exactly why we believe the ECB will act preemptively and forward-looking, raising rates once in June and once in September.&#34;
Jennifer Lee, Senior Economist at BMO Capital Markets, takes a more cautious approach. She stated that if oil prices remain around $100 per barrel, the ECB has reason to stand by, adding, &#34;As long as inflation expectations do not spiral out of control, that is sufficient for the ECB to stay on the sidelines.&#34;
<h2>Oil Prices and Growth Prospects Create Dual Pressure</h2>
Energy prices are one of the core variables in the ECB's policy judgment. Brent crude averaged close to $100 per barrel this month, surpassing the ECB's March baseline assumption peak of $90, though still below the adverse scenario of $119.
On the growth front, the survey indicates that quarterly growth in the Eurozone is expected to remain around 0.2% for the full year, with expansion of 0.9% in 2026, a downward revision from the 1.2% forecast made in early March. Germany and France are projected to grow by 0.7% and 0.9% respectively this year, slightly lower than January survey estimates. Regarding inflation, responding economists expect the average inflation over the next three quarters to be slightly above 3%, with a full-year average of 2.7%, broadly consistent with the ECB's own forecast.
The ECB's decision-making remains shadowed by historical lessons: the bank was heavily criticized for its sluggish response to inflation in 2022, while memories of its 2011 errors—raising rates twice during a commodity price surge, thereby exacerbating the Eurozone debt crisis—remain vivid.

A Reuters survey indicates significantly heightened expectations for an ECB rate hike in June: 44 economists predict a rise to 2.25%, whereas just a month ago, most forecasted unchanged rates for the full year. Hawks argue that if high oil prices trigger a second round of inflationary effects, policymakers must act preemptively, as waiting for data confirmation will be too late. Doves caution that the European Central Bank should avoid repeating the 2011 mistake of raising rates only to be forced into a reversal; if the economic response falls short of expectations, hikes could be delayed or even canceled

- The European Central Bank (ECB) faces a dilemma as escalating energy prices from Middle Eastern conflicts drive inflation above target levels while dampening economic growth forecasts.  
- A recent Reuters survey indicates that a majority of economists expect the ECB to maintain interest rates at 0% during its April 30 meeting, with a potential increase in June to 2.25%.  
- Economic forecasts reveal low growth, with inflation anticipated to average 2.7% this year, while ECB officials are cautious about immediate rate hikes without clear evidence of a broader impact from rising energy costs.

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April Rate Hold Becomes Inevitable; Oil Surpassing $100 May Force ECB to Implement "Preemptive Hike" in June