ECB Expected to Raise Rates Again in September, but Uncertainty Looms Ahead

The European Central Bank (ECB) is expected to raise interest rates again in September by 0.25 percentage points, according to most analysts. This would bring the deposit rate to 2.50%. The ECB has already raised its key interest rates ten times since July 2022.

The main concern for the ECB now is whether higher energy prices will spill over into wages and keep inflation elevated. Energy prices have been high due to the conflict in the Middle East, pushing up headline inflation across the euro area. However, economists remain divided on how much weight to place on July's inflation report.

Morningstar chief market strategist Michael Field says the range of economists' expectations for European interest rates is 'quite tight.' He believes it is likely that the ECB will raise rates at the next meeting in September and possibly again by December, bringing the deposit rate to 2.75%.