ECB Hints at Another Rate Hike as Energy Prices Soar

The European Central Bank (ECB) kept its key policy rate at 2.25% during its July meeting, but hinted at another rate hike in September due to rising energy prices caused by Middle East tensions.

ECB President Christine Lagarde stated that 'risks to the inflation outlook are tilted to the upside' and that 'the full impact of the energy shock has not yet materialized.'

The ECB is concerned about second-round effects from rising energy prices, where crude oil price movements ripple through to consumer prices.

Markets have almost fully priced in an additional rate hike in September, with the probability of a 0.25% rate increase approaching nearly 100%, according to interest rate futures.