Global Market: ECB may raise rates in September as Iran war fuels inflation concerns: Reports
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The ECB raised borrowing costs for the first time in nearly three years in June, seeking to prevent a war-driven surge in energy prices from spreading more broadly through the euro zone economy. Policymakers now see another increase as increasingly warranted, with inflation close to 3%, the conflict continuing and economic activity proving more resilient than expected. The ECB is expected to raise its policy rate to 2.50% from 2.25% in September. The move was already incorporated into assumptions underlying the central bank's June economic projections and would reinforce its efforts to prevent a repeat of the severe inflationary episode that followed Russia's invasion of Ukraine in 2022. Rising natural gas prices and elevated petrol costs have emerged as key sources of inflationary pressure. Natural gas is particularly important for the euro zone, which relies heavily on energy imports. Higher fuel costs risk feeding into broader prices if sustained for an extended period. At the same time, eurozone economic activity has held up better than expected. Recent output figures and business surveys have pointed to continued resilience, giving policymakers greater room to focus on containing inflation without imposing excessive pressure on growth, the sources said. Despite the expected September increase, policymakers appear reluctant to provide guidance pointing toward another series of rate hikes. Long-term inflation expectations remain anchored around the ECB's 2% target, reducing the urgency for officials to signal that further tightening is already in the pipeline. Financial markets currently expect one or two additional rate increases, although the ECB's future decisions are likely to remain heavily dependent on incoming economic and inflation data. Policymakers will have a clearer picture of the inflation outlook once August inflation data are released next week. The ECB's staff will then update their economic projections ahead of the September 9-10 policy meeting, providing officials with a fresh assessment of the impact of higher energy prices and the broader economic consequences of the Iran conflict, Reuters reported. (Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of The Economic Times.) (What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2025, Share Market on Budget 2025 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .) Subscribe to ET Prime and read the Economic Times ePaper Online.and Sensex Today. Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price (What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2025, Share Market on Budget 2025 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .) Subscribe to ET Prime and read the Economic Times ePaper Online.and Sensex Today. Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price
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