Minutes from the European Central Bank’s July policy meeting, released on Thursday, suggest a further interest-rate hike remains likely if inflation pressures fail to abate. The account noted that while decisions remain data-dependent, policymakers saw scope for another increase if inflation prospects do not improve materially.
Several Governing Council members indicated they would not have opposed a hike at the July meeting, citing incoming data that strengthened the case for tighter policy. The ECB had raised rates in June for the first time in nearly three years before pausing in July. The next decision is due on Sept. 10 at an off-site meeting in Berlin, where a hike is all but priced in by investors.
Inflation in the euro area stood at 2.9% last month, still above the ECB’s 2.0% target. ECB Executive Board member Isabel Schnabel said in an interview that the protracted Middle East conflict and the region’s resilient growth pose upward risks to prices. She argued that a higher policy rate may be warranted to counter these pressures.
Reuters reporting indicates that multiple Governing Council members view the timing as appropriate for another increase. Three sources familiar with the matter said officials are prepared to lift the deposit facility rate from 2.25% to 2.50% to mitigate spillovers from the Iran-linked conflict.
