ECB Set for Second Rate Hike as Eurozone Inflation Hits Three-Year High

The European Central Bank (ECB) is set to raise interest rates for the second time this year, as inflation in the eurozone reached a three-year high of 3.3 per cent in August.

This comes after renewed fighting between the US and Iran pushed up energy costs, which are heavily dependent on imports. The surge in prices has been almost exclusively driven by energy, with little sign of inflation seeping into other areas of the economy.

Andrew Kenningham, chief Europe economist at Capital Economics, believes that the ECB governing council will raise its deposit rate from 2.25 per cent to 2.5 per cent. However, some economists argue that a rate hike is not the right decision, as tighter monetary policy may not be effective in tackling the current oil supply shock.