ECB Poised to Raise Interest Rates Amid Eurozone Inflation Surge

The European Central Bank (ECB) is likely to raise interest rates in its next review on September 10, but the hike will not be as dramatic as those seen in 2021 and 2022.

This time around, the ECB is grappling with surging energy costs that have pushed up inflation, which currently stands at 3.3 percent across the eurozone, significantly higher than its target of 2 percent.

In a report published on Tuesday, ECB economists Kristina Barauskaite Griskeviciene and Claus Brand noted that while a rate hike is needed to cool inflationary pressures, the ECB will likely respond in a 'gradual' way compared to 2021-22.

The experts attributed the 3.3 percent inflation rate to higher fuel prices caused by the conflict in the Middle East and its impact on the Strait of Hormuz shipping lane, with energy supply shocks accounting for around 90 percent of the increase in energy inflation between January and May.