The ECB is expected to raise its key rate on Thursday, marking a second increase
since the outbreak of the US‑Iran war, but officials are likely to signal
caution on further tightening as higher borrowing costs could curtail activity.
Eurozone annual inflation rose to 3.3% in August, a near three‑year high and
well above the ECB’s 2% target. Policymakers see no clear second‑round effects
yet from the war‑linked closure of the Strait of Hormuz and the energy price
spike, but warned prolonged conflict and sustained high energy prices would
raise the risk of wage pressure and labour action, and that household heating
costs should jump as winter approaches. President Lagarde is expected to stress
that rates are not on a preset path and that further hikes are not inevitable,
though she is unlikely to rule out additional action; some economists now see a
third hike in December as possible.
