The European Central Bank may keep interest rates unchanged at its next meeting in July if energy prices remain stable, Reuters reports, citing two sources.
The possible pause follows the central bank's decision on Thursday to raise interest rates for the first time in nearly three years.
Monetary policymakers implemented the initial rate hike to curb inflation before rising fuel costs spread more widely across the eurozone economy. The rise in fuel prices was triggered by the outbreak of the war in Iran, which has put significant pressure on regional markets.
Two sources present at the meeting indicated that a pause at the ECB's next meeting on July 22 is currently more likely than another rate hike. However, this stable outlook remains valid only if there are no sharp or significant fluctuations in global energy prices. One source noted that a rate hike next month would require a further surge in oil prices, pushing Brent above $100 a barrel. This high threshold is due to the lack of spillover effects on prices of other goods and services.
A second source stated that another unexpected spike in core inflation could also prompt the central bank to take immediate action. Despite these variables, both sources emphasized that the baseline economic forecast still assumes further policy tightening in the future.
The ECB's current forecasts foresee two more rate hikes as part of its broader monetary policy stance. Therefore, even if policymakers decide to pause in July, they will be able to act later without significantly improving the inflation picture.