ECB Set to Hike Rates Again Amid Eurozone Inflation Surge

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

The surge in prices is largely driven by energy costs, which have risen due to renewed fighting in the Middle East and the resulting impact on oil prices. The US-Iran conflict has sent oil prices soaring, making it unlikely that energy flows through the Strait of Hormuz will return to normal anytime soon.

The ECB's governing council is expected to raise its deposit rate from 2.25 per cent to 2.5 per cent at its meeting on Thursday, as policymakers seek to tame surging prices and prevent further inflation. This move would be the second interest rate hike this year, following a previous increase in June.

Despite some economists arguing that a rate hike is not the right decision, given the largely supply-driven nature of the current price increases, most analysts expect the ECB to pause its hikes after this week's meeting.