ECB Hikes Interest Rates Again Amid Ongoing Iran Conflict

The European Central Bank (ECB) raised interest rates for the second time this year in an effort to combat inflation, which has risen above the target rate of 2% due to high energy costs. The ECB's benchmark deposit rate was increased to 2.5%, the upper end of the 'neutral' range considered by policymakers.

Surging oil and natural gas prices have pushed inflation well past 3% across the 21-country euro zone, and a recent escalation of the Iran war suggests further price pressures that could eventually seep into wage-setting.

The ECB also lifted its 2026 economic growth projection to 0.9% from 0.8% seen in June and now sees inflation averaging 3.0% this year and 2.5% in 2027.