Markets expect the ECB to pause in July, but a sustained surge in energy costs could force policymakers into another tightening move in September.

The European Central Bank, as expected by most economists, will keep the deposit rate at 2.25% at the July 23 meeting, but higher energy prices could lead to another hike as early as September to curb inflationary pressures.

According to a survey of 74 economists conducted July 13–16, all experts expect the ECB to hold the rate. However about 70% of respondents foresee another rate hike in 2026, mainly in September, against the backdrop of rising energy costs.

The market reacted to the rise in oil prices: roughly a 20% increase after the escalation of the war between Iran and other regions of the Middle East. This has prompted market participants to price in two additional hikes over the current year, compared with previous expectations of one increase.

The ECB has already raised rates this year, unlike many global partners, including the U.S. Federal Reserve, the Bank of England, and the Bank of Canada.

Although the latest official data show euro-area inflation falling to 2.8% in June, it remains above the ECB’s 2.0% target, which supports arguments for further rate hikes, but weak growth and the absence of clear signs of a second-round effect suggest caution.

In trading, discussions have arisen about balancing caution with the need to act. In recent years, ECB decisions have largely depended on energy prices and global politics, underscoring the difficulty of taking further steps.

In the July survey of 74 economists conducted from 13 to 16 July, all respondents favored holding the deposit rate at 2.25% at the next meeting. About 70% expect another rate hike this year, most likely in September.

It’s likely the ECB would still have to raise rates, even if this additional noise around the Hormuz Strait hadn’t occurred in the past week.

– Chris Scicluna

Gas prices are significantly higher, and electricity prices have also risen. The ECB should take this into account in its September forecast update. But there are no grounds for another rate hike right now.

– authors of the survey

The balance in the Governing Council today is a little more in favor of the hawks, even though everyone understands: given the pace of growth in the euro area they must be very cautious about raising rates.

– Alain Durre

It is very hard to be confident about anything right now. But it is clear to me: the higher energy inflation, the greater the risk of secondary effects on wages and thus prices, when companies raise prices to cover higher labor costs.

– Simon Wells

Yes, if at the September meeting the oil price reaches around $90 a barrel and there remains high uncertainty about the trajectory of further developments with possible hiking risks, the ECB may consider another rate hike.

– authors of the survey

Economic Forecasts for 2026

Growth expectations for the euro area remain modest: there could be a downward revision of growth forecasts in recent months, but overall a modest expansion with limited growth in the coming quarters is anticipated. The 2026 forecast points to growth of around 0.5%, with a narrower or wider dispersion depending on energy developments and global conditions. Inflation expectations remain above target, and the main drivers behind inflation remain under close scrutiny by monetary policy.

Overall, analysts note the importance of energy dynamics and its impact on future monetary policy. Markets will continue to closely monitor changes on the energy front and ECB signals about future steps.