Episode Details

The ECB just hiked rates to 2.5%—its second move this year—to battle soaring inflation fueled by Iran’s conflict and skyrocketing energy prices. While growth is holding steady at a revised 0.9%, inflation remains stubbornly above target, projected at 3% this year and 2.5% next. The central bank is aiming for “neutral” territory, but investors expect more hikes ahead. Energy costs remain the biggest threat, especially as winter looms with low gas reserves. Surprisingly, core inflation cooled in August, and wages are slowing—while rising bond yields are already squeezing borrowing costs, helping curb demand without direct intervention.

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