Traders see September rate hike as European Central Bank mulls energy price spike
The European Central Bank (ECB) held its main interest rate unchanged at 2.25% on Thursday, in line with market expectations. However, traders are already anticipating a 0.25% rate hike in September, as ECB President Christine Lagarde warned that renewed Middle East hostilities and a rebound in oil prices pose upside risks to the euro zone inflation outlook. Lagarde stated that inflation is expected to remain 'well above target' until the first half of 2027, driven by potential further disruption to energy supplies. The ECB stands ready to adjust rates to ensure inflation stabilizes toward its 2% medium-term target. Eurozone inflation eased from 3.2% in May to 2.8% in June. Analysts from Aviva Investors and Quilter Cheviot noted that the market expects the ECB to remain in a rate-raising mood for the rest of the year, with the pace depending on global developments.
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