European Central Bank Governing Council member Olli Rehn has said the ECB should be ready to react quickly if clear signs emerge that inflation in the euro area is becoming entrenched.
Rehn’s remarks fit into the more cautious tone adopted by the ECB after its latest meeting, at which the central bank left interest rates unchanged. The deposit rate remained at 2%. ECB President Christine Lagarde said after the decision that it had been unanimous, although the discussion also included the possibility of a rate increase.
Signals of readiness for a more decisive response have also come from other central bank officials. Bundesbank President Joachim Nagel said that if the inflation outlook does not improve visibly, the Governing Council could consider appropriate action as early as its next meeting. Madis Müller, head of Estonia’s central bank, made similar comments, noting that a rate hike could become more likely if price pressure proves persistent.
The latest data show that inflation in the euro area has accelerated again. According to Eurostat’s preliminary estimate, annual inflation reached 3.0% in April 2026, up from 2.6% in March. The main driver was energy prices, which rose by 10.9% year on year. At the same time, services inflation declined to 3.0% from 3.2%, while prices of non-energy industrial goods increased by 0.8%.
For the ECB, the key question is whether the rise in energy prices will prove temporary or translate into broader inflationary pressure across the economy. Of particular importance are so-called second-round effects, which occur when higher commodity prices feed into inflation expectations, wage demands and further price increases in other sectors.
For now, the picture remains mixed. Headline inflation has risen, but some core indicators remain more stable. This may encourage the ECB to maintain a cautious approach and wait for further data before deciding whether to tighten monetary policy.
Market attention is now focused on the ECB’s June meeting. Investors will closely examine the new inflation projections, developments in the energy market, wage data and the overall condition of the euro area economy. These factors will determine whether the central bank keeps rates at their current level or opts for a more decisive move.
