ECB raises interest rates to fight off inflation jump
The European Central Bank raised borrowing costs and warned that inflation could remain high for an extended period. Energy markets and geopolitical tensions are still major concerns.
On Thursday, the European Central Bank (ECB) increased interest rates in an effort to combat inflation, which has been driven by surging energy costs following the ongoing conflict between the US and Iran. This marked the second rate hike for the ECB this year. Inflation within the 21-country eurozone has now surpassed the 2% target, reaching 3%. The ECB's outlook remains uncertain, with both inflation risks and economic growth risks looming.
The organization also released its forecast for economic growth in 2026, predicting a modest 0.9% increase compared to 0.8% in June. Inflation is now expected to average 3.0% this year and 2.5% in 2027. The persistent conflict between the US, Israel, and Iran continues to fuel energy cost increases, indicating that inflation will likely remain well above target for an extended period.
Experts warn that the eurozone faces higher mortgage, consumer credit, and loan costs due to the rate increase. However, there has been limited evidence that inflation is spilling over into other areas such as food, goods, and services prices. Sylvain Broyer, chief economist for Europe, the Middle East, and Africa at S&P, expressed concern that the ECB is hesitant to raise rates too slowly, a situation reminiscent of 2022 when the bank implemented measures following Russia's invasion of Ukraine.
Written by urgent.news from DW English (Top Stories)'s reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
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