The European Central Bank (ECB) should raise key interest rates again this Thursday, September 10, a decision driven by persistent inflation, which reached 3.3% in August according to Eurostat, above the current benchmark rate. This increase occurs in a context of continued conflict around the Strait of Ormuz, triggered by the US and Israel against Iran, which keeps oil prices elevated and fuels inflationary pressures.
With this increase, the benchmark rate will stand at 2.5%, still remaining below the recorded inflation level. Ebury analysts consider this value as the upper limit of the neutral rate, arguing that the increase serves as "insurance against current uncertainty," without clear signs of second-round effects that would justify a broader monetary tightening cycle.
However, there is a divergence between market and analyst forecasts. While markets discount a new increase in December, Ebury and Pantheon Macro consider it almost certain that this will be the last increase of the year. Pantheon highlights that the ECB is unlikely to exceed 2.5%, as any value above would be "purely restrictive," something the monetary authority seeks to avoid given the fragility of the eurozone economy.
The September meeting will also include an update on macroeconomic prospects, with the ECB likely revising upward growth projections, given that the economic impact of the conflict has been smaller than anticipated in June. The growth projection for this year stands at around 1%, while inflation is expected to remain at 3% until the end of 2026.
