Eurozone Interest Rates Set to Rise Again Amid Energy Price Surge
The European Central Bank (ECB) is expected to raise interest rates for the second time this year on Thursday, following renewed Middle East clashes that have pushed up energy prices and inflation in the eurozone.
Brent oil has jumped above $100 a barrel, while European gas prices have surged to their highest levels since early 2023, topping 80 euros ($93) per megawatt hour. This is on top of an escalation in the US-Iran conflict and attacks by Iran-backed Houthi rebels on Saudi oil facilities.
With surging energy prices expected to further fuel eurozone inflation, which hit a three-year high in August at 3.3 percent, a fresh hike to borrowing costs looks like a done deal. Dirk Schumacher, chief economist at German public lender KfW, believes a 25 basis point increase is highly likely.
The move would take the ECB's key deposit rate to 2.5 percent, a level last seen in March 2025. However, some experts warn that further hikes could weigh on growth in the euro area as it struggles with the Iran war fallout.