The ECB held rates at 2% in April.
A month later, the hawks are back in charge. Three top voices sent strong hike signals on the same day.
And markets are now betting they get one.
Olaf Sleijpen sits on the ECB board. He also heads the Dutch central bank.
He said in Amsterdam on Tuesday that the ECB will "do everything in its power" to bring inflation back to 2%.
He also said the ECB sits between its "baseline" plan and its "adverse" plan. In plain words: between things going to plan and things going wrong.
That's bank speak for: risks are rising and we may need to act.
Earlier the same morning, board member Isabel Schnabel said the ECB should hike. Chief Economist Philip Lane added that the ECB is not locked in past June.
Traders read that as leaving June wide open. It's a clear shift from April. Back then, the ECB sounded done with hikes.
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Energy prices are the main driver. The Middle East has pushed oil and gas higher.
The ECB is watching it bleed into the rest of the economy. The chain of worry looks like this:
Once that loop starts, it's hard to break.
The ECB cut rates fast last year. The bank thought inflation was sticky on the way down.
It does not want a repeat in reverse. Bundesbank chief Joachim Nagel has warned that energy shocks can take up to 18 months to spread.
Traders now see a 25 basis point hike at the June 11 meeting as the base case. The chance ran between 80% and 90% on Tuesday.
That move would lift the deposit rate from 2.00% to 2.25%. It would be the ECB's first hike since the bank started cutting in mid-2024.
For investors, the impact stretches past Europe. A hawkish ECB tends to lift the euro against the dollar.
That can hurt US sellers and lift Euro bond yields. Yield is just the rate of return a bond pays.
The June 11 vote is the main event. Watch for two things: the rate move, and the wording in ECB chief Christine Lagarde's press talk after.
If the ECB hikes and signals more to come, the rate-cut story markets had penciled in for 2026 is over.
If it hikes and signals "one and done," the impact is muted. A bank that just yanked the rate-cut story doesn't unwind that quickly.
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