The European Central Bank kept its base interest rates unchanged on Thursday. This pause follows June's first hike in three years, as easing inflation provided policymakers with additional time.
The decision comes amid uncertainty regarding how volatile energy prices will affect inflation. The bank is closely monitoring an energy price shock and price pressures unleashed by renewed fighting in the Middle East and the war against Iran, which have pushed inflation over ECB targets.
ECB President Christine Lagarde warned that surging oil prices could shape the rate decision for the next meeting in September. Officials are prepared to raise borrowing costs in September unless the euro-zone inflation outlook improves markedly, leaving the door open for further tightening.
Lagarde also stated that the bank anticipates inflation will remain well above target until the first half of 2027.