ECB Vice President: Inflation Elevated Through 2027, Rate Hike Decision "Prudent"
Claire Weston
ECB Vice-President Boris Vujčić endorsed June's 25-basis-point hike, saying inflation will stay elevated through 2027 and the move was 'robust under all scenarios' — but noted wages show no second-round effects yet, signalling the bar for further tightening remains high.
Why call this rate hike 'robust'?
Vujčić told a monetary-policy forum in London that headline and core inflation will both stay elevated — through 2027.
This means → the hike is not a reaction to a single data point. It rests on a baseline view that inflation stays above target for years.
The eurozone's current inflation rate sits at 3.2%, well above the 2% target; war-driven price pressures are spreading beyond energy.
If inflation is this sticky, why not hike harder?
Vujčić pointed to two braking signals: wages show no second-round effects — compensation per employee is actually falling — and medium-to-long-term inflation expectations remain anchored near target.
In plain terms = prices are high, but pay is not chasing them upward and markets do not expect inflation to spiral. Those two facts are the ECB's baseline for ruling out a panic-driven tightening pace.
This reflects the ECB's current posture: able to hike, but in no rush — leaving room to observe.
Are ECB policymakers on the same page?
Chief Economist Philip Lane said the same day that price growth risks staying above the 2% target "for quite some time."
President Lagarde stressed the day before that the ECB must stay flexible, but "has not yet seen evidence of inflation expectations de-anchoring or triggering second-round effects."
This means → all three senior voices are closely aligned: inflation is persistent, but the wage spiral has not started — so the pace is "steady walk," not "floor it."
What comes next?
Vujčić described eurozone growth as "relatively resilient" but acknowledged the 21-nation bloc is pushing through supply shocks triggered by the war in Ukraine.
In plain terms = the economy is holding up — not because conditions are good, but because it has not broken yet. That limits how much room the ECB has to keep hiking.
The core test ahead: whether inflation falls back to the 2% target around 2027 as the ECB projects. If it does not, the "robust" hiking pace may be forced to accelerate.
Content is for reference only, not financial advice.