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Essentials of Monetary Policy

European Central Bank: A Pause Not a Pivot

July 23, 2026
Oskar Stone
Macro Strategy Associate

According to the European Central Bank (ECB)

  • The ECB held rates steady, as expected.
  • Data since the last ECB decision have generally been positive, but higher oil prices present new risks.
  • We still expect one further hike from the ECB later this year.

Comments

As was widely expected, the ECB held rates steady today, after hiking rates in June. The Governing Council highlighted that “uncertainty remains high and the full inflationary impact of the energy shock has yet to play out”.

Data since the last ECB decision have generally been positive, with upside inflation risks and downside growth risks having seemingly eased. However, those numbers are stale since they pre-date the re-escalation of tensions in the Middle East.

The latest spike in energy prices and the renewed uncertainty for businesses and households have the potential to weigh heavily on the bloc. Hitting the pause button will allow central bankers more time to assess the durability of the rise in oil prices and interpret the fallout.

There’s seven weeks until the next ECB meeting, leaving ample time for conditions to change in either direction. Markets are almost fully priced for another rate hike in September, but a sharp reversal in oil prices could alter that calculus. That said, we continue to expect at least one additional hike before year end. European bond yields are largely unchanged following the release.

2026 Schedule of Central Bank Meetings

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