ECB Minutes: Further Rate Hikes Possible Unless Inflation Outlook Improves

The European Central Bank's latest monetary policy meeting accounts show that although policymakers unanimously decided to hold interest rates steady at the July meeting, they remain open to further tightening. The minutes explicitly state that if the inflation outlook does not improve as expected, the Governing Council should be prepared to raise rates again when necessary.

**Inflation Easing but Caution Persists**

The minutes reflect a cautious stance among policymakers regarding price control. Officials believe the disinflation process is broadly progressing as expected, benefiting both from the diminishing impact of external factors that previously drove inflation higher and from the effects of restrictive monetary policy. However, some policymakers stressed that current inflation levels remain too high, and long-term inflation expectations still appear to be above the ECB's 2% target. The Governing Council must avoid overconfidence and complacency, and remain vigilant against new challenges that could emerge on the inflation front.

**Economic Growth Risks Have Materialized**

On the economic assessment, the minutes note that growth has been weaker than expected, partly due to downside risks that have materialized. This aligns with earlier market concerns over softness in the euro area economy. Despite the loss of momentum, the prevailing view among policymakers is that sufficient measures have been taken to curb inflation over the coming years. Still, they emphasized the need to keep policy flexible and reassess continuously.

**Market Focus on Future Policy Path**

The language of the minutes reinforces the ECB's data-dependent approach. While most participants believe enough has been done, the statement that "further rate hikes should be prepared even if this is not part of the current baseline scenario" leaves clear room for future action. This sends a strong signal to markets: the fight against inflation is not over, and rates may stay higher for longer than previously anticipated.