ECB Hikes Interest Rates Amid Energy Price Fears

The European Central Bank (ECB) is widely expected to raise interest rates on Thursday in response to renewed inflation risks from surging energy prices. Brent crude has climbed over the past month, while European natural gas prices have risen to their highest levels since early 2023.

With eurozone inflation back above 3% in August, largely due to higher energy costs, the ECB is taking a cautious step by policymakers to prevent the energy shock from feeding into broader inflation expectations. Markets have fully priced in a 25-basis-point increase, which would take the deposit rate to 2.5%.

The outlook beyond September is far less certain, with ECB policymakers unlikely to commit themselves to a series of additional rate increases. Economists polled by Reuters largely expect the central bank to stop tightening after this month's expected hike.