The ECB July Meeting highlighted an energy outlook that remained volatile and above pre-conflict levels, while risks to inflation were judged to be tilted upward and risks to growth downward. The Governing Council’s account said developments in the Middle East continued to disrupt global energy supply chains and drive sharp swings in oil markets.
Oil prices stood 6% below their level at the June Governing Council meeting, at $89 a barrel. But European gas prices had risen 16% over the same period, reflecting renewed geopolitical tensions, low European gas storage and resilient Asian demand. The ECB said the overall energy-price outlook was close to the baseline in its June staff projections, though uncertainty remained high.
ECB July Meeting Tracks Energy and Inflation Pressures
Euro area headline inflation slowed to 2.8% in June from 3.2% in May, with energy inflation falling to 8.5% from 10.8%. Core inflation, excluding energy and food, edged down to 2.4% from 2.6%, as goods inflation declined to 0.7% and services inflation to 3.2%.
Even so, the account said the energy shock was still feeding into firms’ input costs and expected selling prices. Food commodity prices had also risen, with weather-related risks and European heatwaves seen as potential additional pressure on food production and prices.
Market-based measures suggested that inflation fixings from mid-2027 remained visibly above 2% over the medium term. Markets were pricing a September 2026 rate increase almost fully and an additional increase by February 2027, while the euro area overnight index swap curve remained above the median expectations in the Survey of Monetary Analysts.
The ECB July Meeting also noted that equity markets had continued to rise on earnings expectations, although technology stocks saw a sharp correction during the week of July 13-17. The account said a reassessment of AI-related valuations could carry implications for corporate credit markets.
