Why has the ECB's urgency to raise interest rates decreased recently, according to the sources?

The ECB's urgency to raise interest rates has decreased because of an unexpectedly rapid retreat in energy prices over the past week, which has reduced pressure on policymakers to act next month; this retreat was driven by higher-than-forecast output from producers like Saudi Arabia, weaker-than-expected oil demand from China (due to substitution with other energy sources), and the absence of feared shortages—such as for jet fuel—while oil prices even failed to react strongly to recent Iran-U.S. conflict escalation.

What is the current likelihood and timing of the next ECB rate hike, based on the sources' assessment?

A rate hike in September remains the most likely scenario, though the decision hinges significantly on June inflation data due Wednesday; if headline inflation falls from 3.2% as markets anticipate, waiting until September is preferred, but a negative surprise could strengthen the case for a July hike—though financial markets now assign only a one-in-three chance to a July move and are not fully pricing in a hike until October.

Oil Price Retreat Eases Urgency for ECB to Act, Sources Say

Jun 29, 2026

Rapidly falling oil prices due to increased supply and lower demand have eased pressure on the European Central Bank to raise interest rates immediately. Policymakers still anticipate a potential hike in September pending June inflation data.

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