The ECB has spent 2026 holding the line. One of its policymakers just put a finger on what could break it.
Olli Rehn sits on the ECB's Governing Council. He said it is "clear" that the bank must move fast if prices start to spread from energy to wages.
He called the trigger a "second-round" effect. That is when workers ask for raises to keep up with rising costs. Then firms pass that along in higher prices.
That's the loop the ECB has watched for months. Rehn said no big signs of it have shown up yet.
Energy prices have stayed high due to the war hitting oil supply. So far, that has not pushed European wage demands much higher.
Rehn said if the war drags on and second-round effects show up, "monetary policy will be tightened strongly in line with the ECB's strategy."
He also said a rate hike is "not a given." That is the kind of phrase ECB folks use when they want to keep their options open.
Rehn made one more point that markets noticed. He said the ECB's council is not guided by market forces.
It bases its calls on prices, growth, and jobs. Not on what bond traders want.
Markets have already done some of the work for the bank. Market rates have moved up on their own, which tightens conditions without the ECB lifting a finger.
ECB officials see another rate hike as quite likely at the June meeting. The off-ramp would be a positive shift, like falling energy prices or a calmer Middle East.
Reuters has said the ECB may raise rates at least twice this year if conditions hold.
The ECB held its policy rate at 2% at its last meeting. That left room to move in either way.
The bank also said inflation should drift back to its 2% target over time. The risk is that war-driven energy prices break that path.
For investors in European stocks and bonds, the wage data is now the key chart to watch. So is the path of oil prices.
A June rate hike would mostly affect short-term bond yields and bank stocks. It would also push the euro higher against the dollar, all else equal.
A hawkish ECB right when the Fed is on hold would mark a clear gap between the two big central banks. That gap tends to move money across borders.
The wage data is the part to watch. As long as wage growth in Europe stays calm, the ECB has room to wait.
If wage growth starts to climb with energy costs, the math changes fast. Rehn's words are a guide, not a promise.
The other thing to track is energy. Falling oil and gas prices would take pressure off the ECB on their own.
A long war or a wider conflict in the Middle East would do the opposite. That is the path Rehn is most worried about.
He is one voice on the council. He is also one of the more hawkish ones.
When the hawks say the trigger is wages, the trigger is wages.
