Traders see September rate hike as European Central Bank mulls energy price spike - CNBC

What the report says

CNBC reported that the European Central Bank left its main interest rate at 2.25% on Thursday, a decision that was largely expected by markets. The focus has shifted to whether policymakers will raise borrowing costs again in September, with traders pricing in the possibility of a quarter-point increase as energy prices add pressure to the inflation outlook.

ECB President Christine Lagarde, speaking after the rate decision in Frankfurt, said inflation is expected to stay “well above target” until the first half of 2027. According to CNBC, she pointed to renewed conflict in the Middle East and higher oil prices as risks that could keep energy costs elevated and feed into broader price pressures. The ECB said it remains prepared to adjust rates as needed to bring inflation back toward its 2% medium-term goal.

The report said euro zone inflation slowed to 2.8% last month from 3.2% in May, but investors remain concerned that energy shocks could slow progress. CNBC cited Ed Hutchings of Aviva Investors as saying markets now expect a 0.25 percentage point increase in September, while Richard Carter of Quilter Cheviot said the ECB’s next steps will depend heavily on developments outside Europe.

The decision follows a June quarter-point rate increase, described by CNBC as the ECB’s first hike since 2023, after inflation pressures linked to the Iran war energy shock began affecting Europe’s economy. The issue matters because ECB policy directly influences borrowing costs, investment decisions and household finances across the euro zone.