Markets brace for ECB rate hike to 2.5% as energy costs fuel inflation above 3%
Financial markets expect the European Central Bank to raise interest rates on Thursday, with sources confirming a 25-basis-point increase targeting 2.5% amidst soaring energy prices and rising eurozone inflation.
The European Central Bank is expected to increase interest rates on Thursday as policymakers address renewed inflation risks driven by surging energy costs. Brent crude has risen over the past month, pushing European natural gas prices to levels not seen since early 2023. These cost increases drove eurozone inflation back above 3% in August, creating pressure on central bank progress toward the 2% target.
Market participants anticipate a quarter-point rate hike, which would lift the deposit rate to 2.5%. Sources indicate this move reflects July meeting minutes and is viewed as a cautious step to prevent energy shocks from fueling broader inflation expectations. While markets have largely priced in a September increase, the outlook for subsequent hikes remains uncertain due to ongoing economic data uncertainty.
