ECB officials told insiders they are not ruling out a second rate hike in the July policy meeting. The prospect follows Thursday’s first increase since 2023, which lifted the deposit rate to 2.25%. Inflation pressures from the Iran‑related war and rising energy costs have revived concerns that a July move may be needed. The next decision will be watched by bond markets worldwide.

Markets had priced a September hike, but the new intel pushes July into view, widening the range for euro‑area borrowers. Lagarde warned that the conflict is dragging down activity, especially in services, and that energy price spikes will keep inflation above the 2% target into 2027. A hold in July remains possible if the geopolitical backdrop eases.

Investors now expect two more hikes before the end of 2027, with ING’s Carsten Brzeski saying a second increase after Thursday’s decision is “more likely”. A July move would tighten financing conditions for corporates and could pressure equity markets already coping significantly with slower demand. ECB policymakers face a tighter trade‑off between curbing price growth and sustaining growth.