ECB Set for September Rate Hike Amid War-Driven Inflation Concerns

The European Central Bank (ECB) is poised to raise interest rates in September to combat inflation and the economic impact of the Iran conflict. Three sources told Reuters that policymakers are ready to increase borrowing costs from 2.25% to 2.50%. The move aims to prevent a war-fueled rise in energy prices from spreading too widely throughout the economy.

Inflation is currently at nearly 3%, and the ECB has been monitoring the situation closely. With the euro zone's economy showing signs of resilience, policymakers believe that another rate hike is necessary to maintain price stability. The ECB raised borrowing costs for the first time in nearly three years in June to prevent a rise in energy prices.

The sources emphasized that there is little appetite among policymakers to signal further tightening after September. Financial markets expect one or two more hikes, but the ECB will reassess the situation when inflation data for August is published next week and its updated economic projections are presented on September 9-10.