European Central Bank policymaker Pierre Wunsch signaled Wednesday he opposes additional monetary tightening, stating that stronger second-round inflation effects would be required to justify further rate hikes. The head of Belgium’s central bank made the remarks during European trading hours, adding to the dovish voices within the ECB Governing Council.
Wunsch’s comments suggest the ECB may be nearing the end of its aggressive tightening cycle that has dominated policy since mid-2022. His stance indicates policymakers are increasingly satisfied with current restrictive rates and want clearer evidence of persistent wage-price spirals before considering additional increases. The remarks come as eurozone inflation has been moderating from peak levels, though core inflation remains elevated.
The euro saw immediate pressure against major currencies following the statement, while European bond yields dipped on reduced hawkish expectations. Traders are now repricing the probability of further ECB rate action in coming meetings.
FXnCO Insight
EUR traders should prepare for increased dovish rhetoric from ECB members, potentially pressuring the euro lower in the near term as rate-hike expectations diminish.
Source: FXStreet