Barclays Forecasts ECB Rate Hike in December Amid Inflation Concerns

Barclays expects the European Central Bank to raise interest rates by another 25 basis points in December, as higher inflation projections and rising energy prices linked to the U.S.-Iran war strengthen the case for further monetary policy tightening.

The forecast comes after the ECB raised its key interest rates by 25 basis points on Thursday and released updated projections indicating that inflation could remain above its 2% target for an extended period. In fact, the central bank's latest baseline outlook points to inflation returning to the target only by late 2027.

Escalating tensions in the Middle East have added to inflation concerns, driving oil prices back above $100 a barrel. This has revived concerns about imported inflation across the fuel-dependent euro zone, potentially complicating the ECB's efforts to bring price pressures under control.