Pierre Wunsch, Governor of the National Bank of Belgium and a member of the ECB Governing Council, said on June 19 that the case for further rate hikes is weakening. He added that the ECB could cut rates if inflation dynamics shift, though a July hike remained under consideration.

The comments land barely a week after the ECB raised its deposit facility rate by 25 basis points to 2.25% on June 11, marking its first hike since 2023.

What the ECB is actually wrestling with

Services inflation hit 3.5% in May, and overall inflation projections for 2026 are averaging 3.0%. Wunsch emphasized a data-driven approach, acknowledging that geopolitical tensions involving Iran have been driving energy price volatility. The mention of second-round inflation effects is also telling: the ECB is watching whether higher prices are feeding into wage demands and broader cost structures, or whether the initial inflation impulse is fading on its own.

Why crypto cares about European interest rates

Empirical studies have shown that increases in ECB long-term interest rates have negatively impacted Bitcoin and Ethereum prices in the past. Balance sheet expansions, on the other hand, have tended to bolster both BTC and ETH.

The June 11 hike to 2.25% extended that headwind. Research has indicated that rate hikes adversely impact assets like Tether, as the broader liquidity environment tightens and capital flows shift toward traditional yield instruments.

What this means for investors

Wunsch acknowledged that another hike was still on the table for July, making the next few weeks of economic data critically important. If services inflation shows any sign of cooling, or if energy prices stabilize, the case for a pause becomes overwhelming.

The risk is that inflation proves stickier than Wunsch hopes. If that 3.5% services reading doesn’t come down, or if geopolitical tensions push energy costs higher, the ECB will have no choice but to keep tightening.