The European Central Bank’s account of its July 22-23 policy meeting, released on August 27, showed officials viewed another interest-rate hike as likely unless incoming data significantly alters the inflation outlook.
Policymakers described the decision to hold rates steady at that meeting as a temporary pause rather than the end of the tightening cycle. The ECB had raised rates for the first time in nearly three years in June, aiming to curb energy-price pressures linked to geopolitical tensions, including the conflict in Iran.
While inflation stood at nearly 3%, officials noted that corporate lending growth accelerated to 4.4% in July, the fastest pace in over three years, signaling continued momentum in credit markets. The ECB’s policy rate is currently at 2.25% and is expected to rise to 2.50% at the September 9-10 meeting if conditions warrant.
ECB board member Isabel Schnabel reiterated earlier in the week that future decisions would depend on incoming data, emphasizing that the July pause did not imply the end of tightening. Policymakers also stressed the need to avoid prematurely signaling the conclusion of the rate-hike cycle, given persistent inflation risks.
Recent economic data suggest the euro zone’s economy has shown resilience, with output and business surveys outperforming expectations. This indicates the ECB’s efforts to control inflation have not yet imposed undue strain on economic activity.
