European Central Bank Governing Council member and Bank of Slovenia Governor Primoz Dolenc indicated that the ECB could potentially keep interest rates unchanged at its next policy meeting, provided the situation in the Middle East does not escalate further.

Speaking at the ECB's annual forum in Sintra, Portugal, on Tuesday, Dolenc stated that a pause in rate hikes in July could be a reasonable choice if energy costs remain near current levels, the sharp volatility in commodity markets does not spread further, and no secondary effects emerge.

"If oil and gas prices remain low, I see no urgency to consider further policy tightening," he said. "Based on the data we have now, it might be appropriate to take a wait-and-see approach and decide in September."

ECB policymakers are currently examining the impact of U.S.-Iran peace talks and falling energy prices on eurozone inflation. The ECB implemented its first rate cut since 2023 in June, and markets anticipate another 25 basis point cut before the end of the year.

Some officials speaking at the Sintra forum noted that the price shock triggered by conflict is not yet over, and it remains to be seen how months of high energy costs will gradually filter through to the broader economy.

With several weeks remaining until the ECB's next policy decision and market conditions still volatile, Dolenc warned that the situation could change rapidly. He also cautioned that the geopolitical backdrop has not truly returned to calm.

"In recent days, we have seen hostilities flare up again," he pointed out. "While everyone hopes for a lasting solution, I don't think this conflict will end in the short term. Therefore, uncertainty remains at a high level."

Inflation Slowing in Eurozone's Largest Economies

Separate data shows that inflation rates have declined in eurozone countries such as Germany, France, and Italy. Regarding this, Dolenc stated he would not overinterpret the latest inflation figures, which indicate a slowdown in price growth across the bloc's three largest economies.

"We still need more evidence to be confident that inflationary pressures are easing sustainably," he said. "If oil prices are significantly higher than the assumptions underlying our early June projections, it may become necessary to re-engage with policy responses."