ECB policymakers keep July hike on table

FRANKFURT, June 12 (Reuters) - European Central Bank policymakers ‌kept a follow-up ​rate hike ​in July on the table on Friday given rapid inflation, but said it was far too early to say if a move would be needed to prevent an Iran war-induced price surge ‌from spreading.

The ECB raised interest rates on Thursday, becoming the first major central bank to ⁠tighten policy on the oil price jump after inflation shot past 3% and even underlying price growth, which filters out energy moves, rose ‌well above its 2% target.

"The Governing ‌Council will be gathering for its next monetary policy meeting in July," Bundesbank President Joachim Nagel said in a statement. "We are keeping all our options open and are ready to respond once again, should we have ​to."

Ulo Kaasik, Estonia's newly inaugurated central bank governor, meanwhile warned that inflation could be quicker than predicted as uncertainty was exceptionally high.

"Considering the various risks, it is rather likely that the price increase in the euro ⁠area will be faster than expected," he said in a blog post, adding that the ECB should still stick to its meeting-by-meeting approach to deciding policy.

While ​public comments were cautious and noncommittal on Friday, sources close to the discussion told Reuters that a hike in July was not their base case for now, and a ​surge in energy prices or another negative inflation surprise would ‌be needed for them to move then.

Still, a pause could still be followed by another hike in September, they added.

Financial markets see a one-in-three chance of another rate hike in ⁠July, but a move by September is fully priced in.

Austrian central bank chief Martin Kocher was more cautious than some, given a sharp drop in energy prices overnight on talk that Iran and the U.S. may be close to a deal to end ⁠the war.

"There are six weeks until the next rate-setting meeting at the end of July," Kocher told a press conference, adding: "A ​lot can happen in that time... Who knows what developments we will have."

Primoz Dolenc, Slovenia's central bank chief, said the ECB had all the flexibility to act if that became necessary.

"We believe that, in the context of high uncertainty about the size and ‌persistence of the energy shock, this level of interest rates allows us to respond appropriately to further developments," he said in a blog post.

Nagel, a potential candidate to succeed ‌ECB President Christine Lagarde next year, said Thursday's rate hike was necessary as inflation was now spreading beyond energy and starting ⁠to affect the price of other goods and ‌services.

"The supply shock triggered by the ​war in the Middle East is proving to be strong and persistent," he said. "That is why we cannot simply 'look through' it."

(Reporting by Balazs Koranyi in Frankfurt; Editing by Matthew Lewis and ‌Jan Harvey)

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