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Macro Score 52 Neutral

ECB Official Urges Caution on Rate Hikes Amid Geopolitical Tensions

Apr 18, 2026 11:13 UTC
EURUSD=X, ^STOXX50E
Short term

Governing Council member Alexander Demarco suggests the European Central Bank should delay borrowing cost increases to avoid unnecessary economic harm. The official highlighted the ongoing uncertainty surrounding the conflict in Iran as a primary driver for a cautious approach.

  • Advocates for a 'wait and see' approach to borrowing costs
  • Cites Iran war uncertainty as a primary risk factor
  • Warns against undue economic damage from premature tightening
  • Believes ECB credibility allows for a delayed response

Alexander Demarco, a member of the European Central Bank's Governing Council, has cautioned against a premature increase in interest rates, arguing that the central bank is better positioned to wait than to act too hastily. The call for patience comes as the Eurozone navigates significant external pressures, specifically the volatility stemming from the war in Iran. Demarco suggests that the risk of inflicting undue damage on the economy through premature tightening is currently greater than the risk of delaying action. In a recent interview, the Maltese official emphasized that the ECB maintains sufficient credibility to "catch up" with rate hikes if they are delayed. This perspective suggests a preference for data-dependency and stability over a rigid schedule of tightening. Markets typically view dovish signals from ECB officials as a reason for bond yields to stabilize and for the Euro to face short-term pressure. The emphasis on geopolitical risk indicates that the ECB is closely monitoring how the conflict in Iran affects inflation and growth trajectories.

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