ECB Interest Rate Hike Looms as Inflation Concerns Persist

Barclays is expecting another interest rate hike from the European Central Bank (ECB) in December, citing persistent inflation pressures and rising energy prices. The forecast follows the ECB's decision to raise its key rates by 25 basis points on Thursday.

The new projections show that inflation will likely stay above the ECB's 2 percent target for an extended period, with Barclays predicting a return to target only by late 2027. This suggests that the central bank may need to continue tightening monetary policy to combat price pressures.

Goldman Sachs also expects the ECB to hike rates by 25 basis points in December, saying it would take rates into 'mildly restrictive territory'. The US-Iran conflict has pushed oil prices back above $100 a barrel, reviving concerns about imported inflation in the euro zone and complicating the ECB's fight against price pressures.

Traders are now pricing in a 93.9 percent chance of a quarter-point rate hike from the ECB in December, according to LSEG data. While Barclays sees little chance of an October move, it expects the central bank to wait until December when policymakers will have updated economic forecasts in hand.