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[Quick Facts]

1. ECB hawks advocate continued rate hikes.

2. The total imports of crude oil and petroleum products from Russia into the EU decreased by 90%.

3. Russian refineries have raised their crude-processing volumes to the highest levels in nine weeks.

4. Markets expect the BoE to raise rates to around 6%.

[News Details]

ECB hawks advocate continued rate hikes

Interest rate hikes may end this year, but it is prudent to take the next steps, which should be gradual and measured, said Yannis Stournaras, European Central Bank's Governing Council member and Bank of Greece Governor, on Monday. We should curb inflation while ensuring financial stability and avoiding an economic recession.

It is the macroeconomic outlook, core inflation and financial conditions that will determine whether to raise rates once or twice, or not at all. The data will determine the ECB's next interest rate action. Nothing can be ruled out, not even the possibility of a pause in July, or the possibility of two more rate hikes.

Inflation in the euro area is expected to come down, and a "significant rise in wages spiral" has not been observed.

Three more ECB officials also delivered speeches. "We need to remain highly data-dependent and err on the side of doing too much rather than too little," said Isabel Schnabel, a member of the ECB Executive Board.

Peter Kazimir, on the other hand, believed that if the ECB cannot eradicate inflation now, high inflation may become entrenched in the economy, forcing policy to remain tight for a longer period of time, causing unnecessary hardship to euro area consumers. Continuing to tighten monetary policy is the only reasonable path forward.

Chief economist Philip R. Lane has a slightly different view, arguing that making decisions based on data could also mean not raising interest rates at one or more meetings and then resuming rate hikes depending on the actual situation.

The total imports of crude oil and petroleum products from Russia into the EU decreased by 90%

Data released by Eurostat on June 19 local time showed that the total imports of crude oil and petroleum products from Russia into the EU decreased to 1.4 million tonnes in March this year, compared with a monthly average of 15.2 million tonnes from 2019 to 2022, a 90% decrease. Russia has been an important source of oil for the EU. But after the outbreak of the Russia-Ukraine conflict, the EU imposed sanctions on Russia, which included a ban on imports of Russian oil. The EU has now begun to shift its sources of oil imports.

Russian refineries have raised their crude-processing volumes to the highest levels in nine weeks

Russian refining facilities processed 5.49 million barrels of crude oil per day in the week ended June 14, up nearly 194,000 barrels per day from the previous week, being the highest processing rate since the second half of April, according to people familiar with the matter Crude supplies to domestic refineries and seaborne exports remain key gauges for oil-market observers seeking clues to Russia's production levels. Russian Deputy Prime Minister Alexander Valentinovich Novak has said several times that Russia is fully implementing its production cut plan. However, strong seaborne exports and a recovery in domestic crude processing have cast doubt on those claims. Russia is restoring its daily refinery throughput as the spring maintenance season is largely over.

Markets expect the BoE to raise rates to around 6%

British two-year government bond yields rose above 5% for the first time since 2008, while markets expect the Bank of England to raise rates to around 6%. Traders once expected peak rates to reach 5.98% by February next year, the highest level since last year. The market briefly digested expectations that the BoE would raise rates by 98 basis points by September, suggesting that the market is almost fully pricing in a 50 basis point hike each in the next three policy meetings.

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