July ECB meeting: Experts predict a pause before september
21 JUL, 2026
By RankiaPro
The European Central Bank (ECB) faces this Thursday July 23 a meeting marked by caution. After the interest rate hike of 25 basis points at its last meeting held in June, the market consensus assumes that the ECB will leave the deposit facility unchanged, set at 2.25%.
The decision, widely discounted, shifts the real focus of attention to the subsequent press conference and the tone that Christine Lagarde uses to describe an energy scenario that has become tense again. The resumption of hostilities in the Middle East and attacks on Russian energy infrastructure have brought volatility back to oil and gas, complicating the reading of an inflation that, despite moderating in June, retains risks biased upwards. This is the backdrop with which four industry experts analyze what to expect this week and looking ahead to September.
Will the ECB maintain interest rates in July?
For Germán García Mellado, manager of Paradigma Flexible Bonds and Paradigma High Income Bonds at A&G Global Investors, the ECB will "with almost total certainty" keep rates unchanged, leaving the deposit facility at 2.25%. In his opinion, energy prices remain, overall, close to the scenarios contemplated in June and do not justify immediate action.
In the same vein, Niall Scanlon, Fixed Income Portfolio Manager at MIFL (Mediolanum International Funds), expects the Governing Council to leave rates unchanged "in line with what the markets discount and with the consensus of analysts". Given that the decision is practically discounted, Scanlon emphasizes that "the focus will be on the press conference, especially on how the Governing Council assesses the recent escalation of tensions in the Middle East and its impact on oil and gas prices". Cristina Gavín, Head of Fixed Income at Ibercaja Gestión, agrees that it is most likely that the institution will opt for a pause, as it is still too early to assess the impact of the June tightening on the European economy.
How does the escalation in the Middle East condition the ECB's policy?
Romain Aumond, strategist at Natixis Investment Managers Solutions, recalls that the temporary nature of the inflation shock was confirmed by the June data, which placed inflation at 2.8% compared to 3.2% in May. However, he warns that the resumption of hostilities in the Strait of Hormuz reintroduces pressure on energy and causes the market to discount two additional increases of 25 basis points before the end of the year.
García Mellado (A&G) points in the same direction: although there is no clear evidence of second-round effects and wage growth continues to moderate, "certain indirect effects of energy price increases on business costs are beginning to be appreciated". Gavín (Ibercaja) adds that the escalation of the conflict between the US and Iran "seems to lead to new tensions in the evolution of inflation", a nuance that distinguishes his reading from that of his colleagues, more focused on the moderation of the underlying data.
What message will Christine Lagarde give at the press conference?
Aumond (Natixis) anticipates a balancing act: "the market will scrutinize the tone of the press conference, as geopolitical uncertainty and the volatility of energy commodity prices make it difficult to interpret the reaction function of the Frankfurt institution". In his opinion, Lagarde will have to reconcile the position of the Executive Committee, which fears a second-round effect in the second half of the year, with data that so far contradict it.
García Mellado agrees that it is unlikely that Lagarde will provide specific guidance on the terminal level of rates, and that the market will monitor any reference to inflation risks having again skewed upwards. Scanlon (MIFL) also expects a "balanced and cautious" communication, which reaffirms the 2% target without fully validating the additional tightening that the markets already discount.
Will there be a new rate hike in September?
Here appears the most relevant nuance among the four visions. García Mellado (A&G) maintains that July will be "a pause to gain visibility, not necessarily the end of the rate hike process", as the ECB will want to preserve room for maneuver if the energy shock ends up being transferred to wages and underlying prices.
Gavín (Ibercaja) goes a step further and explicitly anticipates a rise of 25 basis points in September, which would bring the deposit facility to 2.50%, after which he considers that "the September one will be the last rise we see in the year, as long as the scenario does not suffer a radical worsening". Scanlon (MIFL), on the other hand, avoids committing to a figure and remembers that September, arriving with new macroeconomic projections and two additional inflation data, will be "the most likely moment for a new monetary policy move" if necessary.
What implications does this have for fixed income investors?
Scanlon (MIFL) believes that the short end of the curve has already discounted a tightening greater than what the ECB will finally materialize, which limits the margin for significant new sales in that segment. The market currently discounts slightly more than two additional 25 basis point rises over the next twelve months, an expectation that both Scanlon and García Mellado consider excessive against the ECB's central scenario.
García Mellado (A&G) recalls that the market today discounts about two additional rises that would bring the deposit facility up to 2.75% in the first half of 2027, a path that the ECB will "probably avoid validating" in its July communication.
Conclusion
The four readings converge on one point: the July pause does not close the cycle of increases, it only postpones it. The real divergence is in the schedule and the magnitude of the next move, between those who see September as an already decided rise and those who strictly condition it to the evolution of energy prices. For fixed income investors, the shared message is that volatility will continue to dominate as long as the Middle East sets the pace of European inflation.