Instant View-ECB hikes rates as Iran war adds to inflation angst

**Conor Parle, euro zone economist, Fidelity International:** > "Higher gas and fuel prices will keep the ECB vigilant to a broadening of price pressures, with the recent heatwave and accompanying supply chain impacts likely to increase food inflation. Further to this, the Indeed wage tracker points to a slight pick-up in wage growth that will be monitored for early evidence of second round effects." **Sylvain Broyer, chief EMEA economist, S&P Global Ratings:** > "This rate hike is not just an insurance move. The inflation outlook has worsened over the summer. Supply shocks are not only multiplying, but it is increasingly likely that demand is also adding to inflation. In that context, the ECB may need to move into restrictive territory and cannot rule out further rate hikes at this stage." **Marchel Alexandrovich, European economist, Saltmarsh Economics:** > "As expected, the ECB raises interest rates for the second time in three months, and signals that more policy tightening will likely be required in the coming meetings." > "Although no pre-commitment is made, the new quarterly forecasts show core inflation at 2.3% in 2028. This is higher than the 2.2% projection which was made in June, which indicates that more rate hikes will be needed to get inflation to the 2% target in the medium term." **Ed Hutchings, head of rates, Aviva Investors:** > "Overall, the immediate priority for the ECB is clear: address the inflationary backdrop, and, as such, the market is right in thinking more hikes will be coming. However, with two hikes already being delivered and more than a further two hikes priced, things may well have gone too far." **Patrick Ernst, macro investment strategist, JPMorgan Private Bank:** > "Another hike before year-end is no longer a tail risk. Driven by the latest Middle East conflict escalation, oil and gas prices have moved materially higher, bonds have sold off, and expectations for further central bank tightening have firmed. The ECB moved as anticipated, but what accompanied that rate decision matters more." > "In keeping the door open to further tightening, policymakers made clear that an energy-led inflation risk is still very much in play. One hike is not a ceiling. The odds of another before year-end have risen, and the path from here will depend considerably on how the geopolitical picture develops." LONDON, Sept. 10 (Reuters) - The European Central Bank raised interest rates for the second time this year in a widely flagged move on Thursday, hoping to tame an inflation rise driven entirely by higher energy costs from the Iran war. The euro was steady at around $1.161 EUR=, a touch lower on the day, and euro zone government bond yields edged up to multi-year highs after the decision. The rate-sensitive two-year German bond yield was at around 3.072% DE2TY=RR, holding near more than two-year highs hit earlier in the session, up from 3.058% prior to the ECB decision. The broad European STOXX 600 index .STOXX was last down 0.5%.

Instant View-ECB hikes rates as Iran war adds to inflation angst

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