On Thursday, July 23rd, 2026, the European Central Bank (ECB) announced it would keep its base interest rates unchanged for the time being, citing ongoing uncertainty related to the economic effects of the war against Iran. The ECB had increased rates the previous month and suggested further hikes might be necessary, but recent stable economic data reduced the urgency for immediate action.

Despite the decision to hold rates steady, the ECB highlighted that oil futures briefly surpassed $100 per barrel amid escalating daily exchanges of fire between the US and Iran. The Frankfurt-based bank noted that current energy price projections align with those made in June, though they remain significantly higher than pre-conflict levels in the Middle East.

"Uncertainty remains high and the full inflationary impact of the energy shock has yet to play out," the ECB stated, emphasizing its close monitoring of the shock's intensity, duration, and indirect effects. The bank reaffirmed its commitment to maintaining inflation around its 2% medium-term target.

ECB President Christine Lagarde revealed that some governors had considered raising rates during the meeting. She warned that prolonged high energy prices could lead to broader inflation increases through indirect and second-round effects. The ECB plans to adopt a data-dependent, meeting-by-meeting approach to future monetary policy decisions, leaving the door open for potential rate hikes if necessary.

Sources