European rate hike likely amid policy debates

The European Central Bank is heading towards raising the main interest rate by at least 25 basis points, with a 100% expectation of such an increase, in order to combat eurozone inflation, which reached 3.3% in August, alongside a significant rise in energy prices by 14.3%. The increase in yields on European government bonds, particularly the 10-year German bond yield, which stabilized at 3.44%, is adding additional pressure on monetary policy. It is expected that rates will reach 2.5% amid ongoing monetary tightening, but future directions depend on developments in the Middle East crisis and its impact on energy prices, with investors holding varying views on the potential peak level.

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