FX.co ★ ECB Holds Rates Steady as Energy Risks Persist

The European Central Bank kept its key interest rates unchanged at its July meeting, after raising them by 25 basis points in June—the first rate hike in three years—prompted by surging energy prices and persistent inflationary pressures. Since then, policymakers have adopted a cautious, data-dependent wait-and-see stance, as easing inflation, slower wage growth, softer economic activity, and more moderate inflation expectations have reduced the urgency for further tightening. Although energy prices remain highly volatile, the ECB noted that the outlook is broadly consistent with its June projections and still significantly above pre-conflict levels in the Middle East. The Governing Council also stressed that uncertainty remains elevated and that the full inflationary impact of the energy shock has not yet been fully felt. It will therefore continue to closely monitor the shock’s scale, duration, and wider implications for inflation and the broader economy.