ECB’s Dolenc makes case for September rate hike at Jackson Hole

European Central Bank Governing Council member Primoz Dolenc said on Friday there is a strong case to raise interest rates at the bank's September 10 meeting, adding his voice to a growing consensus that the ECB will tighten monetary policy again next month as inflation remains stubbornly above target.

Speaking at the Federal Reserve's annual Jackson Hole symposium in Wyoming, the Slovenian central-bank governor cited economic growth that has exceeded expectations and persistently elevated energy costs, according to Bloomberg. Dolenc said policymakers "shouldn't wait for second-round effects to appear" and that the inflation situation is "not resolving," while noting that new ECB projections in December will offer further clarity on the path ahead.bloomberg+2

Market Pricing and Rate Expectations

Swap markets are pricing in a 96.6% probability of a 25-basis-point hike at the September 10 meeting, which would bring the deposit rate to 2.50% from the current 2.25%, according to Morningstar. The ECB last raised rates by a quarter point in June, its first increase since the hiking cycle that ended in 2024.global.morningstar+1

Michael Field, Morningstar's chief European markets strategist, said polling of economists points to "an almost nailed-on 25 basis point increase at the next meeting". Another hike of the same size is priced in for the spring, with roughly a 50/50 chance of an additional move in December.morningstar+1

Inflation Outlook and Energy Risks

The rate decision comes against a backdrop of rising consumer prices. Preliminary eurozone inflation data due on September 1 is expected to show prices rose 3.0% year over year in August, up from 2.9% in July and well above the ECB's 2% target. Core inflation is forecast at 2.6%, up from 2.5%.global.morningstar

Energy prices remain the primary driver. Goldman Sachs ↗ 4.67% Research expects headline inflation to peak at 3.4% in the fourth quarter before easing in 2027, though analysts flagged upside risks from geopolitical tensions and rising gas prices. European gas storage is projected to stand at just 69% on November 1, an all-time low for that date, leaving the continent more exposed to price spikes during a cold winter.global.morningstar

Path Beyond September

ECB executive board member Isabel Schnabel reinforced the hawkish tilt last week, telling Bloomberg that "at the current policy rate, inflation is unlikely to return to target over the medium term, and therefore further tightening will be necessary". The Governing Council's next rate decisions after September are scheduled for October 29 and December 17.global.morningstar