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ECB hawks argue for more tightening despite July rate pause

Accounts of the ECB’s July 22 to 23 meeting show some members feared waiting could prolong above target inflation and force more aggressive tightening later.

Reported · Written up by our desk · Central Banks

ECB minutes based on the July 22 to 23 meeting in Frankfurt show a unanimous decision to hold rates in July masked a hawkish internal debate, according to Action Forex.

Some Governing Council members said they would not have opposed raising rates immediately, arguing that incoming data still supported further tightening and that the “option value of waiting” was limited.

The hawkish group warned that delaying action could prolong above target inflation, disrupt expectations, and leave the ECB having to tighten more aggressively later, with concerns that policy could fall behind if wages or underlying inflation respond more strongly to an energy shock.

Other members backed the pause, citing easing June inflation to 2.8% from 3.2%, moderating wage growth, and anchored longer term inflation expectations near 2%, while stressing the decision was data dependent and that another rate hike would likely be needed unless the inflation outlook improves.

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