According to sources familiar with the matter, European Central Bank officials are preparing to raise interest rates again in September, unless there is a clear improvement in the eurozone inflation outlook.
Based on current information, particularly the Middle East conflict and its economic fallout, the ECB's internal view suggests a 25-basis-point rate hike may still be necessary to curb persistent inflationary pressures. However, sources emphasized that no final decision has been made, and the policy path could change if the Middle East situation de-escalates, peace talks make progress, or the eurozone economy slows more sharply than expected. This stance aligns with the ECB's commitment to a "meeting-by-meeting" decision-making framework.
An ECB spokesperson declined to comment on future interest rate policy. ECB President Christine Lagarde signaled the possibility of a September rate hike during a press conference in Frankfurt on Thursday. She revealed that some Governing Council members had discussed whether to act immediately at this meeting, but the final decision was to keep the deposit facility rate unchanged at 2.25%.
Lagarde stated, "Some members did consider whether a rate hike should be implemented now. However, we believe it is appropriate to maintain a wait-and-see stance for now, and we will closely monitor developments and upcoming economic data in the coming weeks."
Last month, the ECB became the first central bank among the G7 nations to start raising rates since the outbreak of the Middle East conflict, and it remains at the forefront of major developed economies in tackling inflationary pressures. Lagarde reiterated that risks to eurozone inflation remain tilted to the upside. She noted that energy shocks could intensify further, leading to stronger pass-through effects on other goods prices and wages. The longer energy prices stay elevated, the greater the likelihood of pushing up overall inflation.
The situation in the Middle East has continued to escalate recently. On Thursday, international oil prices surged after Iran-backed Yemen's Houthi group claimed attacks on two Saudi oil tankers, with Brent crude breaking above $100 per barrel for the first time in two months, further fueling concerns over rising energy costs and a potential resurgence of global inflation.
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