The ECB keeps rates at 2.25% and opens the door to raising them in September
24 JUL, 2026
By RankiaPro
The ECB decided this Thursday, July 23, to keep its official interest rates unchanged, a decision widely expected by the market following the increase applied in June. However, the background of the meeting is far from calm: the rebound in energy prices, fueled by the escalation of the conflict between the U.S. and Iran, has once again placed inflationary risk at the center of the debate.
Analysts agree that today's pause does not mean that the cycle of increases has ended, and that September could bring a new decision on interest rates.
Why has the ECB decided to pause rate hikes?
Madison Faller, global investment strategist at J.P. Morgan Private Bank, believes that today's pause should be understood as "keeping the foot suspended on the brake", not as a sign of relaxation. Faller recalls that the ECB was one of the first central banks to raise rates this year in the face of inflationary pressures, and that the same instinct to anticipate risk remains in force.
Sandra Rhouma, vice president and European fixed income economist at AllianceBernstein, confirms that the Governing Council kept the official rates unchanged as widely expected by the market, and emphasizes that the institution continues to depend on the data, without committing to a predefined path. For Tina Fong, economist and strategist at Schroders, the inflation data for June has been "a welcome respite", although insufficient for the body to declare the battle won.
How does the escalation of oil and gas affect inflation?
The focus of all analyses is on energy. Rhouma details that oil prices have risen about 40% since the beginning of the month, already above the assumption managed by the ECB's base scenario, while European gas has rebounded about 50% since July. This places the eurozone in the adverse scenario contemplated by the institution itself.
Conor Parle, economist for the eurozone at Fidelity International, adds nuances: beyond oil, gas prices had already been rising before the war escalation, driven by the need to replenish reserves for the winter and by the increase in Chinese imports. Fong agrees that the intensification of the Middle East has once again boosted crude oil, increasing the risk of more persistent inflation. Ulrike Kastens, senior economist at DWS, goes further and warns that the total inflationary impact of the energy shock has not yet fully passed on to prices, so the risks continue to be tilted upwards.
Will the ECB raise interest rates in September?
The consensus among the five managers points to a rise at the next meeting, although with nuances in magnitude. Parle predicts that, once the ECB updates its forecasts in September, it will be in a comfortable position to raise rates by another 25 basis points, reaching the upper end of its neutral range. Fong also expects a 0.25% increase, also relying on the resilience of the eurozone and the additional boost provided by Germany's fiscal stimulus package.
Kastens is the most specific in the figures: her house expects a new rise to 2.50% in September, based on the projections of the ECB's own technical staff. Rhouma agrees that, after the escalation of the conflict between the U.S. and Iran and the increase in energy costs, a rise in September remains the base scenario for AllianceBernstein. Faller is the most cautious voice in the group: although he does not rule out the increase, he emphasizes that the bar to act is getting higher and higher, conditioned on energy prices falling quickly.
Is there a risk of second-round effects on wages?
One of the points that most reassures analysts is the absence, for now, of wage contagion. Rhouma collects the response of the ECB president, Christine Lagarde, at a press conference: "Second round effects? We are not observing them". Survey indicators point to a continued slowdown in wage growth, the main transmission channel of this type of effects.
Kastens confirms that the central bank currently does not anticipate significant second-round effects derived from wages, and that most inflation expectation indicators remain around the 2% target. Kastens adds that the decision to maintain the rates was unanimous, although some members of the Council had contemplated a rise; Lagarde insisted that this does not imply a prior commitment to September, as a broad range of economic data will be published beforehand.
Conclusion: What scenario do experts handle for 2027?
Beyond the tactical decision of September, Rhouma offers the most complete strategic reading: general inflation should return to the ECB's target by the end of 2027, as underlying pressures continue to moderate. This trajectory would open the door to rate cuts to a neutral level during the second half of 2027, once the current adjustment is completed.
The joint message from the five firms is clear: the July pause is a waiting compass conditioned by energy, not a final point. The combination of economic resilience, absence of wage contagion, and open geopolitical risks leaves September as the key date to know whether the ECB resumes the rises or extends the pause.
