The European Central Bank is poised to raise its key interest rate by 25 basis points to 2.50% at its September 9-10 policy meeting, according to sources familiar with internal deliberations. The move would mark the second increase in three months, following the ECB’s first hike in nearly eight years in June.
Inflation in the euro zone remains close to 3%, above the ECB’s 2% medium-term target, driven by elevated natural gas and petrol prices. Policymakers aim to prevent a repeat of the post-2022 inflation surge that followed Russia’s invasion of Ukraine, which pushed energy costs to record highs. Energy price risks have been amplified by the ongoing Iran conflict, though the ECB’s June projections already assumed the September hike.
Financial markets expect one or two additional rate increases beyond September, but ECB officials have signaled no intention to commit to further tightening. Long-term inflation expectations remain anchored at 2%, reducing the urgency for additional measures. Recent euro zone economic data and business surveys indicate the economy is holding up better than anticipated, suggesting the current tightening cycle is not yet straining growth.
The ECB’s updated economic projections, due for release at the September meeting, will provide fresh insights into inflation and growth outlooks. Next week’s inflation data release may also influence the decision, though the timing of the hike appears largely predetermined based on current conditions.
