Officials at the European Central Bank are not ruling out the possibility of another interest rate increase as soon as the next monetary policy meeting, according to informed sources.

While markets and economists widely anticipate that ECB policymakers will implement another hike in September when they convene and update quarterly forecasts, the sources indicated that a July increase cannot be excluded due to concerns about inflation stemming from the conflict in Iran.

These individuals, who requested anonymity as they were discussing private matters, stressed that the ECB could still opt to hold rates steady in July should the inflation situation improve in the interim.

The ECB executed its first interest rate increase of 2023 on Thursday. President Christine Lagarde cautioned that the inflation, initially triggered by soaring energy costs, is now spreading across the eurozone's 21 member nations.

The central bank's latest economic outlook indicates that consumer prices will rise more rapidly over the next two years, while weak demand will weigh on economic growth.

"The conflict in the Middle East is weighing on economic activity, and surveys also show that growth is slowing, particularly in the services sector," Lagarde stated. "Rising energy prices will further elevate inflation over the summer and keep the inflation rate above target through the first half of 2027."

While central banks in regions like the UK and North America are currently on hold, investors expect the ECB to implement two more increases to its deposit rate, which currently stands at 2.25%.

"Following today's decision, the likelihood of another ECB rate hike in July or September has increased," noted Carsten Brzeski, Global Head of Macro at ING, in a message to clients.