Overview
- The European Central Bank is widely expected to raise its main policy rate by 25 basis points to 2.50 percent on Thursday, Sept. 10, responding to a recent rise in inflation.
- A surge in oil and European gas prices after renewed Middle East hostilities has pushed eurozone inflation to about 3.3 percent, above the ECB’s 2 percent target.
- Households will feel the move quickly through higher borrowing costs, with tracker mortgage repayments rising roughly €13 a month for every €100,000 borrowed and other loan rates likely to follow.
- Financial markets are pricing in further rate increases into next year and long-term bond yields have climbed, tightening financing costs for governments and businesses.
- Policymakers face a trade-off because higher rates can temper demand-driven inflation but do not fix energy supply shortages, and the ECB will publish updated growth and inflation forecasts while President Christine Lagarde answers questions on the outlook.