Minutes of the European Central Bank's June Governing Council meeting showed that while nearly three rate hikes are priced in, inflation is expected to significantly exceed the target until the first half of 2027. The ECB raised the deposit facility rate to 2.25 percent at the June meeting, and markets are pricing in two more hikes over the next year. The minutes noted that despite nearly three 25-basis-point hikes being priced in, headline inflation will rise further this summer and remain well above target until early 2027. The ECB intends to keep its options open for various Middle East scenarios, and did not indicate whether this rate hike is the first step in sustained tightening or a one-off move. According to sources, the drop in energy prices following the memorandum of understanding between the US and Iran has eased pressure for a rate hike at the July meeting, but there is a strong view that further hikes will be needed thereafter.