ECB Faces Hike Decision Amid Eurozone Resilience

The European Central Bank (ECB) is expected to raise interest rates by 25 basis points at its next meeting, marking the second hike this year. According to Carsten Brzeski, global head of macro research at ING, the case for a hike has strengthened since July due to the eurozone economy showing an unexpected resilience to the war in the Middle East.

Headline inflation has continued climbing and is expected to stay above 3% year-on-year for the rest of the year. Brzeski noted that oil prices are elevated, and there's a risk of a fresh gas price shock rising, making it difficult for most ECB policymakers not to see a case for another hike.

The new round of ECB staff projections is not expected to bring major changes, with growth and inflation forecasts revised slightly higher due to earlier upward revisions to first-quarter growth and higher oil prices. However, Brzeski said that after next week's hike, the deposit rate at 2.5% would remain within the range the ECB considers neutral.