Barclays Expects ECB to Raise Interest Rates Again in September

The European Central Bank (ECB) is likely to raise interest rates again in September due to strengthening economic activity and rising inflation, according to Barclays.

The bank's strategists noted that euro area GDP growth was driven mainly by external demand, with domestic demand remaining subdued. In Germany, second-quarter GDP growth was revised up to 0.3% from 0.2%, while in France it remained unchanged at 0.0% quarter-on-quarter.

Survey data also reinforced the improving picture, with the European Commission's Economic Sentiment Indicator rising 1.3 points to 98.4 and Germany's Ifo business climate index climbing 2.1 points to 88.8.

On the inflation side, national releases from France and Spain pointed to a further pickup in headline prices in August, with flash euro area HICP inflation tracking at 3.39% year-on-year.