Meeting of 22-23 July 2026
The ECB’s July 2026 meeting reviewed inflation pressures from energy, food, and AI-driven markets, noting persistent risks despite recent oil price volatility. Policy rates were held steady after June’s hike, with September’s meeting flagged for reassessment amid Middle East tensions.
Isabel Schnabel of the ECB noted that oil prices had fluctuated sharply since mid-June 2026, briefly dropping after a preliminary peace deal before rebounding. Brent crude remained below pre-war levels but well above June’s lows, while longer-dated futures stayed elevated, signaling sustained price risks. Energy markets showed broader strain, with refining margins at record highs due to reduced capacity in the Middle East and Russia, pushing petrol and diesel prices up. Natural gas prices also stayed near post-war peaks, compounded by low storage levels.
Food prices rose since June, driven by weather risks like El Niño and heatwaves in Europe, while fertiliser costs stabilized. Inflation expectations remained above target over the medium term, with market fixings indicating persistent pressures beyond 2027. The ECB’s wage tracker showed moderate wage growth at 2.6% in 2026, easing second-round effects from energy shocks. Core inflation edged down to 2.4% in June, but supply chain pressures and input costs stayed elevated compared to pre-conflict levels.
Global economic activity remained resilient, with the composite PMI outside the euro area at 52.2 in Q2, supported by AI-driven demand and stockpiling to mitigate supply risks. The euro held steady near $1.14, while euro area PMIs dipped to 49.1 in Q2 but showed signs of recovery in June. Manufacturing held up due to defense spending and inventory building, though services lagged amid energy-related uncertainty. Labor markets showed mixed signals, with unemployment near historic lows but job postings declining year-on-year.
The ECB kept key interest rates unchanged after June’s hike, citing uncertainty and the need for further assessment in September. Bank lending rates for firms held at 3.6%, with credit standards tightening slightly for mortgages and business loans. The Governing Council emphasized readiness to adjust policy as risks from the Middle East conflict and AI-driven inflation dynamics evolve, while monitoring transmission to underlying inflation.