ECB Planned Further Rate Hike in July Amid Ongoing Inflation Concerns

The European Central Bank (ECB) had already penciled in a further interest rate hike at its July meeting, even though it decided to keep rates on hold. Policymakers thought another increase was necessary unless inflation improved significantly, with the ECB describing their decision as a 'pause' rather than the end of tightening cycle.

According to the ECB's account of the meeting, policymakers were considering a rate hike as soon as September 9-10, when they might raise the policy rate to 2.50% from 2.25%. The decision was data-dependent and subject to change if inflation improved.

ECB board member Isabel Schnabel emphasized that borrowing costs would need to rise further based on data, but the latest output data and business surveys showed the euro zone's economy was doing better than expected, suggesting the ECB's efforts to rein in price hikes were not putting undue strain on activity.