Rising energy costs and Middle East tensions revive speculation of a surprise ECB rate increase next week, ING analysis shows.
The European Central Bank may reconsider a rate hike at its 23 July meeting due to surging oil prices and geopolitical risks. While the base case remains unchanged rates, renewed inflation concerns could prompt action despite no new macro projections being released.
Energy prices have rebounded sharply since mid-June, reversing earlier declines that had eased rate hike expectations. The ECB’s June 25bp increase to 2.25% was followed by a drop in oil prices, but recent Middle East tensions have restored inflationary pressures.
Internal divisions persist, with some policymakers potentially pushing for further tightening. The Sintra conference reinforced the ECB’s hawkish stance, though the absence of updated forecasts may limit immediate policy shifts.