The ECB kept policy rates unchanged on Thursday but signaled scope for a
September rate rise as rising energy costs risk keeping inflation above its 2%
target. The bank, which tightened in June, said recent data on prices, wages,
activity and inflation expectations have been broadly stable, reducing near-term
urgency for more tightening. Renewed U.S.-Iran tensions have pushed crude toward
$100/bbl and European gas to their highest levels in over three years,
intensifying price pressure. Market participants expect the ECB may act at its
next meeting to prevent an energy-driven inflation broader pass-through. The ECB
said uncertainty remains high, the full inflationary impact of the energy shock
has yet to materialize, and it is closely monitoring the shock’s strength,
persistence and indirect and second-round effects.
