Euro-area consumer prices increased by 2.9% in July 2026 compared to the same month last year, up from 2.8% in June, according to Eurostat data released on July 31 [1, 2, 3]. Energy prices surged by 10% in July, largely due to renewed conflict in the Middle East after the collapse of a US-Iran ceasefire in late July [1, 2]. Brent crude oil prices rose above $90 per barrel amid the escalating tensions [3].
ECB policymakers paused interest rate hikes in late July to assess the impact of rising oil prices on inflation and economic growth [1, 2]. However, money markets now price a 90% chance of a 25 basis point rate increase in September, with further tightening expected by year end [1]. ECB officials also signaled a higher probability of a September hike. Lithuania's Gediminas Simkus said the odds of a hike are "much higher" than of holding rates [1]. Slovakia's Peter Kazimir said the ECB will likely raise rates at least once more even if conditions improve [1].
Austria's Martin Kocher noted that "uncertainty and volatility remain high" amid geopolitical risks [1]. Moody's Analytics euro-zone forecaster Kamil Kovar said the inflation data together with the Middle East situation has "further strengthened the path for a September ECB rate hike" [2].
The euro-area inflation figures and geopolitical developments underline market expectations that the European Central Bank will resume tightening monetary policy next month. ECB officials continue to monitor energy and inflation dynamics closely.
The ECB’s next policy decision is scheduled for September 2026, when the bank is widely expected to raise interest rates again to curb inflation pressures fueled by energy costs and geopolitical instability [1, 2].
