The European Central Bank is poised to resume its tightening cycle as soon as September, with policymakers signaling that July’s rate pause was not the end of hikes. According to the official account of the ECB’s July 22–23 meeting, another 25-basis-point increase was already on the table, and sources cited by Reuters indicate governors are now ready to lift the policy rate from 2.25% to 2.50% at the September 9–10 gathering.
Inflation in the euro zone is running close to 3%, with the ongoing Iran conflict keeping energy prices elevated. The meeting account showed the ECB deliberately used the word “pause” twice and stressed it was important not to suggest the tightening cycle had ended. Policymakers remained data-dependent but concluded that another hike would likely be necessary unless the inflation outlook improved.
Nordea added to the hawkish signals, telling clients that underlying inflation has been slow to cool and negotiated wage growth remains above levels consistent with the ECB’s 2% target. Markets have been pricing around a 60% probability of a 25-basis-point hike, according to Refinitiv data, while euro-area bond yields have already moved higher, with Germany’s 10-year Bund yield near 2.6%.
The euro-zone economy has remained more resilient than expected, with corporate lending growth reaching 4.4% in July, the fastest pace in more than three years. ECB board member Isabel Schnabel said incoming data will determine how much further rates need to rise and did not rule out additional moves beyond September.
