By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Madis Müller said Tuesday that an April rate hike could not be ruled out if energy prices stayed elevated for long, warning that the assumptions underpinning Eesti Pank’s latest baseline were already looking too benign.

Müller, who heads Eesti Pank, spoke in Tallinn as the Estonian central bank published new projections cutting this year’s growth forecast to 2.8% from the 3.6% it had projected in December. The bank now sees consumer price growth at 3.8% this year and harmonized inflation at 3.9%.

“The base-case scenario … can probably be considered to be the optimistic scenario,” Müller said, referring to assumptions that were fixed on March 11. He added, “We certainly can’t rule out changes in interest rates already in April if energy prices remain at a high level for a long time.”

Eesti Pank said the new energy shock had not yet shown up in activity data, but that markets were now expecting faster inflation and accompanying interest-rate increases. The forecast assumes oil prices begin to ease in the second half of the year, while also stressing that actual outcomes could differ sharply because developments in energy markets are highly unpredictable.

Under the new baseline, Estonia’s economy is then seen growing 2.5% in 2027 and 2.8% in 2028, while harmonized inflation slows to 2.3% next year and 2.1% in 2028.