ECB Prepares Second Rate Hike Amid Energy Price Surge
The European Central Bank (ECB) is expected to raise interest rates for the second time this year on Thursday, as energy prices surge due to renewed Middle East clashes.
The international oil benchmark Brent jumped above $100 a barrel on Wednesday, while European gas prices soared to their highest levels since early 2023, topping 80 euros ($93) per megawatt hour.
This has put upward pressure on inflation in the eurozone, which already hit a three-year high in August. Dirk Schumacher, chief economist at German public lender KfW, said that another interest rate rise of 25 basis points is 'highly likely', taking the ECB's key deposit rate to 2.5 percent.
The move may weigh on growth in the euro area as it struggles with the Iran war fallout, but recent data has come in surprisingly strong. The central bank delivered its first increase since 2023 in June and paused at its last meeting in July due to concerns about further hikes harming the economy.