ECB Set for Another Rate Hike as Middle East Conflict Fuels Eurozone Inflation

Barclays expects the European Central Bank (ECB) to hike interest rates by another 25 basis points this December. This comes just after the ECB raised rates by the same amount on Thursday, pushing borrowing costs higher as ongoing inflation and rising energy prices, especially due to tensions in the Middle East, continue to worry policymakers. The central bank's latest projections show inflation likely staying above its 2% target until late 2027, making further action seem necessary. Traders are already betting heavily on a December increase, with a 93.9% chance priced in, and other major banks like Goldman Sachs agree. This tough stance on inflation is largely driven by oil prices, which have climbed above $100 a barrel following attacks involving the United States and Iran in the Middle East, increasing concerns about imported inflation for the Eurozone. With the ECB Governing Council set to meet in December with fresh economic forecasts, all eyes will be on their decision. Any further rate hikes could make borrowing more expensive for businesses and people across Europe, potentially slowing economic growth, even as ECB Chief Economist Philip Lane warned that high energy prices could hurt spending. How the US-Iran conflict develops will also heavily influence oil prices and, in turn, the Eurozone inflation fight.