As inflationary pressures continue to build, the policy stance within the European Central Bank is clearly turning more hawkish.

According to Bloomberg, the latest minutes from the ECB's April 29-30 meeting reveal that during last month's policy session, some officials were already leaning towards supporting a rate hike. The minutes state, "Some members indicated that they would not have objected to a rate hike being considered as an option at this meeting." They also note that it "may be increasingly inappropriate" to "look through" inflation, with officials suggesting that the current policy discussion has shifted from "whether to raise rates" to "when it would be most appropriate to do so."

Officials generally agree that European monetary policy currently faces a dilemma: on one side, energy prices remain high and inflationary pressures are accumulating; on the other, economic growth and confidence indicators are simultaneously weakening. Several officials expressed concern that the current inflation rate, which has risen to 3% and is still climbing, could further drive up wage demands and lead to a de-anchoring of medium- to long-term inflation expectations. To prevent this scenario, the ECB may need to tighten monetary policy further, even at the cost of increased economic slowdown pressures.

Following the meeting, several ECB officials have publicly discussed the possibility of a rate hike in June. ECB Chief Economist Philip Lane stated on Thursday that even if the energy shock triggered by the conflict in Iran gradually eases in the future, its "second-round effects" will persist for some time. Currently, economists and market investors widely expect the ECB to implement at least two more rate hikes within the year.

Inflation Risks Rise, Economic Signals Diverge

In assessing inflation, officials' judgments have become more cautious. The meeting minutes indicate that "the upside risks to the inflation outlook have intensified." The energy price shock is "not only large in magnitude but also becoming more persistent," with rising risks of transmission to broader inflation dynamics.

Officials are particularly focused on the future direction of energy markets. The minutes outline two possible scenarios: if energy flows through the Strait of Hormuz resume, oil prices could decline; however, Saudi Arabia and Qatar have warned that repairing damaged facilities will take time, and a return to normal supply levels will require further time. If the conflict persists or worsens, energy markets will become tighter, leading to further increases in oil and natural gas prices and a rise in shortage risks.

Inflation expectations show divergence. Short-term inflation expectations have risen notably, but most long-term indicators remain anchored around 2%. However, officials are concerned that if short-term high inflation persists, long-term expectations could also become unanchored.

Regarding the economic outlook, officials remain divided. The meeting minutes note that "some signs, especially in survey data, suggest that the situation is weighing on confidence and economic activity," but some officials maintain a cautious stance, arguing that "there is little new hard data, and evidence of the impact remains limited." This divergence indicates that the ECB still faces significant uncertainty in assessing the potential impact of rate hikes on the real economy.