ECB's Wunsch Says Case for Rate Hikes Is Weakening

Pierre Wunsch, the Belgian central bank governor and an ECB Governing Council member, said June 19 that the case for further rate hikes is weakening. He told reporters the ECB could cut rates if inflation dynamics shift, though a July hike remains under consideration.

The comments land a week after the ECB raised its deposit facility rate by 25 basis points to 2.25% on June 11, its first hike since 2023.

Services inflation hit 3.5% in May. Overall inflation projections for 2026 average 3.0%. Wunsch stressed a data-driven approach, noting that geopolitical tensions involving Iran have been driving energy price volatility. The mention of second-round inflation effects matters: the ECB is watching whether higher prices feed into wage demands and broader cost structures, or whether the initial inflation impulse fades on its own.

Empirical studies show that ECB long-term rate increases have historically weighed on Bitcoin and Ethereum prices. Balance sheet expansions, by contrast, have tended to support both assets.

The June 11 hike to 2.25% extended that headwind. Research indicates rate hikes adversely impact stablecoins like Tether as the broader liquidity environment tightens and capital flows shift toward traditional yield instruments.

Wunsch acknowledged another hike was still on the table for July, making the next few weeks of economic data critical. If services inflation shows any sign of cooling, or if energy prices stabilize, the case for a pause becomes overwhelming.

The risk is that inflation proves stickier than Wunsch hopes. If that 3.5% services reading does not come down, or if geopolitical tensions push energy costs higher, the ECB will have no choice but to keep tightening.