ECB Prepares to Hike Rates Amid Rising Energy Costs

The European Central Bank is expected to raise interest rates on Thursday by 25 basis points, according to sources. This decision comes as inflation in the euro zone has risen above 3% for August, driven by higher energy costs. The ECB's move will be seen as an insurance rate hike, with some calling it dovish.

While a September rate hike is considered a done deal, there are questions about whether the ECB will increase rates again in the future. Policymakers have little appetite to signal further rate increases, but traders anticipate a high chance of another move by December and one more next year.

Economists expect the inflation and growth forecasts to remain broadly unchanged, although some anticipate GDP estimates could be nudged higher. The ECB will likely revise up its 2026 growth forecast slightly, according to SEB macro economist Pia Fromlet.