ECB saw another rate hike as likely after July meeting

Investing.com -- European Central Bank policymakers anticipated they would probably need to raise interest rates one more time to address the impact of the Iran war, according to the ECB’s account of its July meeting released Thursday.

The ECB held interest rates steady at its July 22-23 meeting after raising them in June for the first time in nearly three years to prevent a war-driven increase in energy prices from becoming embedded in the economy.

The meeting account showed policymakers were already planning a future rate increase, potentially as soon as September.

"While decisions remained data-dependent, another rate hike would likely be necessary unless the inflation outlook improved significantly," the ECB said.

The central bank added its official communication should not yet commit to a September hike in case the inflation outlook improved.

Reuters reported earlier this week that these doubts had been resolved. With inflation at nearly 3%, the Iran conflict continuing and the euro zone economy showing resilience, ECB governors were prepared to raise the policy rate again to 2.50% from 2.25% on September 9 to 10.

In the account, policymakers twice described their decision to hold rates steady in July as merely a "pause" in rate hikes.

"It was important not to suggest that the pause in rate hikes at the current meeting meant that the end of the tightening cycle had been reached," the ECB said.

ECB board member Isabel Schnabel said earlier this week data would determine how much further borrowing costs would need to rise.

Recent output data and business surveys showed the euro zone’s economy was performing better than expected. Data Thursday showed banks increased their corporate lending at their fastest pace in more than three years at 4.4% in July.

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