The ECB Governing Council held a monetary policy meeting in Frankfurt on July 22-23, 2026, reviewing economic developments, energy markets, inflation outlook, and decided to keep interest rates unchanged.
The European Central Bank’s Governing Council convened in Frankfurt am Main on Wednesday and Thursday, 22-23 July 2026, to review financial, economic, and monetary developments.
Ms. Schnabel reported that since the June 2026 meeting, financial markets were influenced by the Middle East conflict and developments in artificial intelligence (AI). Oil prices remained sensitive to geopolitical tensions, with disruptions to energy supply chains causing swings in oil markets. Brent crude oil prices briefly fell to pre-war levels after a peace agreement, but remained below recent peaks. Futures prices stayed elevated, indicating persistent upside risks.
Market developments showed decoupling from oil price volatility, with inflation expectations rising again after rebounds in oil prices. Tight inventories and constrained refining capacity pushed up petrol and diesel prices, while natural gas prices remained high with upside risks. Food prices had increased, partly due to weather risks like El Niño and heatwaves, affecting food production and prices.
Market-based inflation outlooks showed short-term declines but medium-term expectations remained above 2%. Risk-free rates reflected higher inflation compensation and real rates, with markets expecting further policy tightening in the euro area, including hikes in September 2026 and February 2027. In the US, monetary policy expectations remained stable with some movements following CPI data releases.
Euro exchange rates showed little change against the US dollar, with the euro at USD 1.14. Euro area economic activity showed signs of resilience, with PMI indicators improving in June, supported by higher defence spending and stockbuilding. Labour market conditions remained tight, with unemployment at 6.2% in May, though job postings declined.
Fiscal policies in the euro area were slightly more expansionary in 2026, with overall stance broadly unchanged. Financial conditions tightened slightly, with bank lending rates stable but credit standards tightening amid higher perceived risks. Loan growth remained resilient, supported by increased funding for large firms and investment in digital and defence sectors.
Based on incoming data, the Governing Council decided to keep the three key ECB interest rates unchanged, citing high uncertainty and the need to monitor inflation risks. The September meeting will provide further assessment, with new projections and economic data expected to clarify the inflation outlook.
The Council emphasized a data-dependent, meeting-by-meeting approach, maintaining readiness to adjust policy if necessary. Communication will stress that upside risks to inflation persist, and that the current pause does not imply the end of tightening. The goal remains to bring inflation back to 2% in the medium term, with a cautious stance until more evidence is available.
The next monetary policy account is scheduled for release on 8 October 2026.
