ECB Prepares for Another Rate Hike Amid Ongoing Conflict

European Central Bank (ECB) policymakers thought another interest rate hike was likely needed to contain the fallout from the Iran conflict, according to the ECB's account of its July meeting. The bank kept rates on hold at 2.25% on July 22-23, after raising them in June for the first time in nearly three years to combat rising energy prices.

ECB policymakers were already planning a future rate increase, possibly as soon as September, unless the inflation outlook improved significantly, according to the account. They described their decision to hold rates steady as a 'pause' in rate hikes, rather than the end of the tightening cycle.

With inflation at nearly 3% and the euro zone economy showing signs of resilience, ECB governors are now ready to raise the policy rate again to 2.50%, according to sources. ECB board member Isabel Schnabel said data would determine how much further borrowing costs would need to rise.