ECB policymakers eye interest rate Pause in July - Reuters

Investing.com -- The European Central Bank could keep interest rates on hold at its next meeting in July if energy prices remain stable, according to a Reuters report citing two sources. This potential 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 hike in an effort to curb inflation before fuel costs spread more broadly across the euro zone economy. These rising fuel costs were triggered by the outbreak of the Iran war, which has heavily pressured regional markets.

Two sources at the gathering indicated that a pause at the ECB's next meeting on July 22 is currently more likely than another hike. However, this stable outlook remains contingent on the absence of any sudden and large swings in global energy prices.

One source noted that it would take a new surge in oil prices, pushing Brent crude past $100 a barrel, to trigger a rate rise next month. This high threshold exists because second-round effects on the price of other goods and services have been absent so far.

A second source stated that another unexpected jump in core inflation could also prompt the central bank to take immediate action. Despite these variables, both sources emphasized that the baseline economic outlook still anticipates further tightening down the road.

Current ECB projections point to two more rate hikes within their broader monetary policy timeline. Therefore, even if policymakers choose to pause in July, they could still act later without a material improvement in the inflation profile.

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