The European Central Bank (ECB) intends to hike interest rates next month for the first time since 2011 in response to a forecast that inflation will rise more than anticipated.

The ECB's governing council has stated that the base rate for the 19-member currency bloc will be raised by 0.25 percent in August, with a further, perhaps higher, increase set for September.

The increase in July will increase the primary deposit rate for commercial banks from -0.5 percent to 0 percent and the lending rate from 0 percent to the Bank of England's comparable 1 percent base rate.

Quantitative easing, the monthly injection of electronic funds into the economy, will also cease in July. However, the existing stock of ECB loans will remain at over £8tn, or 63 percent of the eurozone's annual gross domestic output.

At a meeting in Amsterdam, the governing council stated that inflation had become a "major challenge" and that inflationary factors had "expanded and intensified."

Inflation will average 6.8 percent this year, significantly higher than the 5.1 percent forecasted in March, before decreasing to 3.5 percent in 2023 and 2.1 percent in 2024.

Officials expressed concern that Russia's invasion of Ukraine has impacted "confidence, consumption, and investment," diminishing the eurozone's growth potential.

It is disrupting trade, causing material shortages, and contributing to rising energy and commodity costs. According to the ECB, these issues will continue to weaken confidence and growth shortly.

It was unlikely, however, that the invasion would cause a recession in the eurozone, the report stated, adding: "The conditions are in place for the economy to continue to grow due to the ongoing reopening of the economy, a strong labor market, [government] support, and savings accumulated during the pandemic."

Inflation in the eurozone surpassed 8 percent last month and could reach its peak in the third quarter before the ECB predicts a steady decline.

The majority of the inflation spike was attributed to sky-high energy prices. In addition to the rapid increase in food costs, underlying price growth, excluding volatile food and fuel prices, was considerably above 2 percent.

Hetal Mehta, a senior European economist at Legal & General Investment Management, opined that the likelihood of a recession in the eurozone next year was significant.

After its debt-to-GDP ratio reached 160 percent during the pandemic, Italy would be the most susceptible to rising interest rates, according to her.

"The European Central Bank is in a difficult position, with exceptionally high inflation, decreasing GDP, and a tightening labor market. We now expect a 60 percent chance of a euro area recession in the second half of 2023," added Metha.

"Higher ECB interest rates and Italian borrowing costs cast doubt on the sustainability of Italian debt. Consequently, the ECB will have to be more "predictable" in raising interest rates than other central banks, such as the Federal Reserve and the Bank of England.