ECB holds deposit rate at 2.25% as Iran conflict pushes oil toward $100 and keeps inflation above target
The European Central Bank kept its key deposit rate unchanged at 2.25% on 23 July, pausing after a June quarter-point hike, as the Iran war drives Brent crude back toward $100 a barrel and keeps euro area inflation at 2.8%.
ECB holds rates steady
On 23 July 2026 the European Central Bank left the deposit facility rate at 2.25%, pausing after its June hike of a quarter point. That increase, the first in nearly three years, was intended to curb inflation stirred by the US-Iran war. The decision was widely expected; the Governing Council noted “high uncertainty” and cautioned that the full impact of the energy shock on prices is yet to unfold.
The uncertainty remains high, and the effects of the energy shock on inflation have not yet fully materialised.
Inflation dips but remains above target
Euro area consumer price growth fell to 2.8% in June from 3.2% in May, still above the ECB’s 2% medium-term goal. In Germany, the inflation rate eased to 2.3%, helped partly by a temporary fuel discount. The central bank repeated it is “firmly determined” to steer inflation back to target, but the path is clouded by volatile energy markets.
Oil rally rekindles inflation fears
Renewed fighting in the Iran war and Houthi attacks on oil tankers in the Red Sea pushed Brent crude near the symbolic $100-a-barrel mark on Thursday. Natural gas hit its highest price since the conflict began. Maximilian Wienke, market analyst at eToro, described the central bank’s predicament.
If the oil price stays above $90 a barrel, the inflation spectre could return faster than many would like.
Markets brace for September hike
The ECB’s next policy meeting in September will be accompanied by fresh inflation and growth projections. Many economists see a further rate increase then. Alexander Krüger, chief economist at Bethmann HAL, said a September hike “remains on the radar.” Mortgage rates in Germany are already hovering near 4%, with Finanztip expert Dirk Eilinghoff noting that another ECB move before year-end is priced in.
- ECB raises deposit rate to 2.25% in first hike since September 2023
- ECB leaves deposit rate unchanged at 2.25% amid high uncertainty from Iran war
- Next ECB meeting; markets expect a possible rate increase with new forecasts
- Euro area May
- 3.2 %
- Euro area June
- 2.8 %
- Germany June
- 2.3 %
A cautious balancing act
The central bank must weigh the risk of persistent inflation against the danger of choking off investment and growth. Heiner Herkenhoff, chief executive of the German Banking Association, said waiting to assess the effect of past tightening is “the right course” while financing conditions stabilise. Michael Heise of HQ Trust called the current rate appropriate despite Middle East tensions. Whether Christine Lagarde will signal a tightening bias at the post-meeting press conference is the next question for markets.
