ECB Prepares Another Rate Hike as Energy-Driven Inflation Surges

The European Central Bank (ECB) is likely to raise interest rates again due to inflation concerns. The current inflation rate in the euro area has risen to 3.3% in August, up from 2.9% in July.

This increase is largely driven by higher energy prices, with adverse energy supply factors accounting for around 90% of the rise in energy inflation between January and May 2026, according to ECB economists Kristina Barauskaitė Griškevičienė and Claus Brand. The ongoing war in the Middle East and the closure of the Strait of Hormuz have contributed to these higher prices.

The ECB had initially delayed raising interest rates due to the conflict, but delivered its first hike on June 11, increasing its deposit rate from 2% to 2.25%. With inflation now above 3%, market pricing suggests another rate increase is imminent, with expectations pointing to a rise from 2.25% to 2.50% at the ECB's meeting on September 10.