ECB governors see more tightening ahead with October in play

European Central Bank policymakers anticipate additional tightening of monetary policy in the coming months to combat inflation exacerbated by the war, according to Reuters sources. The ECB increased interest rates for the second time this year on Thursday, signaling concern that rising gas and oil prices could persistently drive up inflation, potentially necessitating further rate hikes.

This growing apprehension stems from the sharp escalation in energy costs, which the central bank views as a threat that could spread beyond the energy sector, requiring more aggressive interest rate increases to curb its impact. While a possible move might occur during the ECB's meeting on October 29, the decision will hinge on forthcoming economic data and developments in Iran, underscoring the ECB's data-driven approach to policy decisions.

ECB President Christine Lagarde cautioned against predicting the bank's next move during a recent news conference, reiterating the ECB's commitment to adhering to its policy of meeting-by-meeting, data-dependent decisions.