ECB Set for Second Rate Hike as US-Iran Conflict Drives Inflation

The European Central Bank is poised to raise interest rates for the second time this year as the ongoing US-Iran conflict drives up energy costs and fuels inflation. Inflation in the eurozone hit a three-year high of 3.3 percent in August, surpassing the ECB's two-percent target.

Andrew Kenningham, chief Europe economist at Capital Economics, predicts that the ECB governing council will increase its deposit rate from 2.25 percent to 2.5 percent.

Some economists, however, believe that a rate hike is not the right decision, citing the supply shock driven by energy prices and arguing that tighter monetary policy won't effectively address it.

The eurozone economy has shown resilience, growing faster than expected in the second quarter, but analysts expect the ECB to pause its hikes after this week's meeting.