ECB Rate Hike Expected Amid Inflation Concerns

The European Central Bank (ECB) is expected to raise interest rates on Thursday, with market odds suggesting a quarter-point hike to 2.5%.

This move would follow a previous rate increase in June, when the ECB lifted its deposit rate from 2% to 2.25% in response to an energy shock caused by the Iran war.

The current inflation figures are high, with eurozone inflation hitting 3.3% in August, but core inflation, which strips out energy and food prices, actually fell to 2.4% from 2.5%, and services inflation dropped to 3% from 3.3%.

This suggests that expensive energy is not feeding through into other areas, a key consideration for the ECB as it weighs whether to tighten monetary policy further.