Against a backdrop of acute uncertainty, weak growth, subdued wages, and elevated market interest rates, monetary tightening is warranted only when there is convincing evidence that higher inflation is becoming entrenched. No such evidence has yet materialized in Europe.
LONDON—The European Central Bank appears set to raise interest rates on June 11. Policymakers’ statements suggest this, markets expect it, and the ECB’s economic analysis provides a rationale for it, highlighting concerns that the energy-price shock caused by the Iran war will lead to a sustained rise in eurozone inflation.