The European Central Bank is widely expected to raise its key interest rate by 25 basis points to 2.5% at its September policy meeting, according to three sources familiar with the matter.
The move would mark the second hike in three months, following a June increase from 2.25% to 2.5%, as policymakers seek to contain inflation running close to 3% and rising energy costs linked to regional geopolitical tensions. Sources indicated that while the ECB remains prepared to tighten policy further, additional increases beyond September are unlikely to be signaled at this stage.
ECB officials cited the euro area’s resilient economic performance as evidence that inflation control measures have not unduly constrained growth. Long-term inflation expectations remain anchored at the bank’s 2% target, reducing the urgency for aggressive tightening. However, market pricing suggests investors anticipate one or two more rate increases after September.
The central bank’s June hike was its first since 2021, aimed at preventing energy price shocks from spreading through the economy. The upcoming decision was already embedded in the ECB’s June economic projections, signaling the bank’s commitment to avoid a repeat of the 2022 inflation surge following Russia’s invasion of Ukraine.
Clarity on the inflation outlook may come from August consumer price data, due next week, and updated staff forecasts to be released at the September 9-10 meeting. The ECB declined to comment.
