ECB saw another rate hike as likely after July meeting

European Central Bank officials expect to raise interest rates another time following their July meeting, according to the ECB's summary of the July proceedings published Thursday. The ECB maintained interest rates at its last meeting on July 22-23 after increasing them in June for the first time in nearly three years to curb the impact of a war-driven surge in energy prices.

While the specifics of when a potential September rate hike might occur were not detailed, the ECB indicated it would be necessary unless inflation concerns significantly eased. The central bank cautioned that its official statement about the September hike should not be definitive if inflation prospects improved. Earlier reports from Reuters suggested these reservations had been addressed.

With inflation hovering around 3%, the ongoing Iran conflict, and a resilient euro zone economy, ECB governors were ready to hike the policy rate to 2.50% from 2.25% on September 9-10. The ECB emphasized that their decision to pause rate hikes in July was merely a brief pause in the tightening cycle, not an indication that the tightening process had ended.

Board member Isabel Schnabel indicated that future policy decisions would depend on data. Business surveys and recent economic data revealed the euro zone economy was performing better than anticipated. Bank lending to corporations increased at its fastest pace in over three years, reaching 4.4% in July.