ECB Poised for Another Rate Hike as Euro Zone Inflation Soars Above 3%

The European Central Bank (ECB) is expected to raise interest rates again on Thursday, as inflation in the euro zone rose above 3% in August due to high energy costs. Sources told Reuters that the ECB is ready to hike rates by a quarter-point to 2.5%, with traders fully pricing in this move.

Carsten Brzeski, ING's global head of macro, described this rate hike as an 'insurance rate hike' or a 'dovish rate hike', indicating that policymakers are being cautious due to the ongoing US-Iran conflict and its impact on oil prices.

Economists expect the ECB's inflation and growth forecasts to remain unchanged, but some anticipate GDP estimates could be revised higher. The labour market is soft, and wage growth is slowing, which may limit further rate increases.