Is the ECB's September 2024 interest rate hike considered certain, and what is the main reason behind it?

Yes, the September rate hike is 'basically' a done deal, according to sources cited by Reuters, with traders fully pricing in a 25-basis-point increase to 2.5%. The primary driver is the rebound of euro zone inflation above 3% in August, fueled by higher energy costs—specifically rising Brent crude and European gas prices hitting their highest level since early 2023.

What do ECB policymakers signal about future rate hikes beyond September 2024, and what economic factors constrain further tightening?

Policymakers show little appetite to signal further hikes, though traders anticipate possible moves by December and next year—largely tied to persistent energy-driven inflation. However, most economists believe the ECB will likely stop after September, citing limited room for additional increases due to risks to economic growth; crucially, services inflation has dropped, the labour market is soft, and wage growth is slowing—indicating energy-driven price pressures are not yet broadening into core inflation.

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