ECB Interest Rate Hike Looms as Europe Frets Over Inflation

The European Central Bank (ECB) is set to make another potentially consequential interest-rate decision as policymakers face an increasingly difficult economic environment.

Markets expect a quarter-point increase in interest rates following a similar move in June, but the ECB must balance controlling prices with protecting economic activity.

Rising inflation and climbing bond yields create a delicate balance for the ECB. Inflation has been moving higher across the euro zone, challenging the expectation that it would return to the central bank's 2% target.

The ECB is concerned about allowing inflation expectations to become entrenched, making the task of restoring price stability harder in the future.