[ECB Governing Council Member Villeroy: ECB's Next Move May Be a Rate Hike, But Timing Is Unclear] ECB Governing Council member Villeroy said on Thursday that with the ongoing conflict in the Middle East, the ECB's next move is likely to be a rate hike, but it is too early to determine when such a hike will be necessary. Last month, the ECB kept its key interest rate unchanged at 2%, but listed several ways the development of the conflict could affect the eurozone's economic outlook. In an adverse scenario, disruptions to oil and gas transport via the Strait of Hormuz would continue until the end of the second quarter, keeping energy prices high. In this scenario, ECB economists predict that average inflation this year will reach 3.5%, well above its 2% target. Villeroy said, "The prolongation of the conflict is clearly a negative factor. We are closer to a moderately adverse scenario than the baseline scenario. The ECB must remain vigilant as there are signs that inflation expectations are rising."
