ECB Set to Hike Rates as Eurozone Inflation Hits 3.3 Percent

The European Central Bank (ECB) is likely to raise interest rates when it conducts its next review on September 10, according to experts. The hike will not be as dramatic as those seen in 2021 and 2022, when energy-driven inflationary pressures were a major concern.

Currently, inflation across the eurozone is running at 3.3 percent, significantly higher than the ECB's target of 2 percent. The spike was partly caused by higher fuel prices attributed to the conflict in the Middle East and its impact on the Strait of Hormuz shipping lane.

ECB economists Kristina Barauskaite Griskeviciene and Claus Brand noted that while a rate hike is needed to encourage savings, discourage spending, and cool inflationary pressures, the ECB will likely respond in a 'gradual' way compared to 2021-22. They attributed this difference to the fact that the current energy-driven inflation hike is caused by a combination of supply-side factors, with demand and public policy stimulus playing minor roles.