The European Central Bank keeping rates on hold in April was a "close call", minutes released Thursday said, the latest sign that the bank is preparing to raise the cost of borrowing.
The Frankfurt-based central bank for the 21 countries that use the euro held its key deposit rate at two percent in April, where it has been since June last year.
But analysts and markets have pencilled in rate hikes for later in the year as the Middle East war and Iran's near total closure of the Strait of Hormuz drive up energy prices, feeding into broader inflation.
Adding to evidence of a hawkish shift in ECB communications, Thursday's minutes said keeping rates where they were had been "a close call", conditional on the bank stressing it was keeping a close eye on prices.
"A number of members noted that the decision was a close call and that they would not have opposed raising rates at the current meeting," they said.
The ECB's rate-setters backed a hold "provided that communication stressed the Governing Council's firm commitment to setting monetary policy to ensure that inflation stabilised at the target," they added.
Though evidence of second-round effects that could further fuel inflation such as wage rises was so far limited, the minutes said, it was clear that there was upwards pressure on inflation.
The Middle East conflict "would last longer than had been expected, with the energy price shock proving more persistent and its repercussions broadening," members said according to the minutes.
"Upside risks surrounding the inflation outlook had intensified," the minutes added.
ECB chief economist Philip Lane told Nikkei in an interview released Tuesday that the bank would likely revise its inflation forecast upwards at the June meeting, hinting that a rate hike could be on the way.
Higher interest rates usually hold down inflation by reducing demand, often at the expense of economic growth, as borrowers feel the pain of paying more interest on money they borrow.
