ECB Signals Interest Rate Hike May Resume Soon

The European Central Bank (ECB) has released its July 22-23 monetary policy meeting accounts, revealing that policymakers remain open to further tightening despite keeping interest rates unchanged.

The accounts show that members stress another rate hike will likely be necessary unless the inflation outlook improves significantly. However, they avoid committing to a move at the September meeting.

According to the accounts, the Governing Council considers incoming economic data as providing a strong case for pausing the tightening cycle in July. Headline inflation fell to 2.8% in June from 3.2% in May, while core inflation eased to 2.4% from 2.6%. Wage developments also provided additional arguments for keeping rates unchanged.

However, some members would not have opposed raising rates in July and argued that the likelihood of another increase eventually proving unnecessary was low. They warned that waiting too long could delay inflation's return to target and potentially require more aggressive monetary tightening at a later stage.