Proponents of further interest rate increases argue that the European Central Bank must act decisively to prevent inflation from becoming entrenched in the eurozone economy. With headline inflation at 2.9% and core inflation rising to 2.5%, the current monetary policy stance may not be restrictive enough to bring prices back to the 2% target. By raising rates, the ECB can signal its commitment to price stability and help anchor long-term inflation expectations, which is vital for maintaining public confidence in the currency.
Supporters also point to the resilience of the eurozone economy as a key reason to proceed with tightening. The 0.4% growth recorded in the second quarter suggests that the economy can withstand higher borrowing costs without falling into a deep recession. If the ECB waits too long to act, it risks allowing second-round effects—where higher energy prices lead to broader wage and service cost increases—to take hold, which would be much harder and more painful to reverse later.
Furthermore, the current geopolitical climate, particularly the instability in the Middle East, poses a persistent threat to energy prices. A proactive approach to interest rates provides a necessary buffer against these external shocks. By cooling domestic demand, the central bank can offset the inflationary impact of imported energy costs, protecting the purchasing power of households over the medium term.
Ultimately, the argument for a September rate hike is rooted in the necessity of preventing a wage-price spiral. While higher rates are never popular, they are a essential tool for ensuring that the recent surge in energy prices does not permanently damage the economic stability of the euro area. For businesses and consumers, a clear and firm policy path from the ECB is preferable to the uncertainty of prolonged, high inflation.