European Central Bank Expected to Raise Rates to 2.50%

The European Central Bank is expected to raise interest rates by a quarter point to 2.50% in September, according to a Reuters poll of 69 economists. This anticipated move follows a period of high energy prices resulting from a six-month conflict between the United States and Iran. The conflict has kept oil prices approximately 25% above pre-war levels and pushed euro zone inflation to 2.9% last month.

A majority of polled economists believe the deposit rate will remain at 2.50% through at least the third quarter of 2027. This projection stems from expectations that inflation will not return to the bank's 2% target until that time. If implemented, this would represent the shortest tightening cycle for the bank since 2011.

The forecast is supported by resilient economic activity within the region, with the euro zone economy expanding by 0.4% last quarter.