ECB's Kazimir Signals Rate Hike, Boosting Euro vs US Dollar on Inflation Fears

ECB Governing Council member Peter Kazimir warned of a potential modest rate hike to combat sticky 3.2% core inflation, driving the euro higher against the US dollar and lifting Eurozone bond yields. This hawkish shift follows dovish comments from policymaker Mārtiņš Kazāks on April 22, who cited Middle East uncertainty and urged no rush, with markets then pricing just 22% odds for a near-term hike but 68% for June. Kazimir's remarks have markets now betting on a 25bp increase from 4.00% to 4.25% at the June 12, 2025 meeting, highlighting policymaker divisions amid 6.4% unemployment and fragile growth.