"We must act before high inflation starts to appear normal": the Governor of the Bank of Slovakia considers further ECB rate increases inevitable - BFM

The Governor of the National Bank of Slovakia, a member of the ECB Governing Council, stated that policymakers must act before high inflation becomes normalised and that further ECB rate increases are inevitable. The comments signal that a hawkish faction within the Eurosystem sees persistent inflation as requiring additional tightening rather than a pause. The transmission mechanism runs through the rate differential: expectations of a higher ECB deposit rate path tend to lift short-end euro yields and support the euro against currencies where policy is expected to stay easier, while also tightening financial conditions for rate-sensitive sectors. The euro and euro-area short-dated government bonds, particularly German Bunds and periphery sovereigns, are most directly exposed, with bank equities often benefiting from a steeper curve. Traders will watch the next euro-area flash HICP release and the ECB's upcoming policy meeting for confirmation of whether core inflation is proving sticky enough to justify further hikes.

The Euro (EUR) is the currency of 20 European Union member states. Major EUR movers include ECB Governing Council decisions, Eurozone CPI prints, Bund/BTP spread events, and political risk from France, Germany and Italy.

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