ECB Anticipates Rate Hike as Oil Prices Fuel Inflation Bets

The European Central Bank (ECB) is widely expected to raise interest rates on Thursday in response to rising oil prices and subsequent inflation. Brent crude has climbed over the past month, while European gas prices have reached their highest level since early 2023, according to Reuters.

Traders have fully priced in a quarter-point increase to 2.5%, as euro zone inflation rose back above 3% in August due to higher energy costs. Sources told Reuters that the ECB is ready to hike again in September, echoing the minutes of its July meeting.

Policymakers appear reluctant to signal further increases after September, but traders still anticipate a high chance of another move by December and one more next year, again reflecting energy costs. Most economists polled by Reuters think the ECB will stop after September, as further hikes could hurt economic growth.