ECB Hikes Interest Rates Again to Combat Inflation

The European Central Bank (ECB) raised interest rates for the second time this year to combat rising inflation. The hike aims to tame an inflation surge driven by higher energy costs from the Iran war.

Surging oil and natural gas prices pushed inflation beyond 3 percent across the 21-country euro zone last month, exceeding the ECB's 2 percent target. Energy prices are expected to continue putting upward pressure on inflation, with further price increases possible due to the ongoing conflict.

The ECB also upgraded its economic growth projection for 2026 to 0.9 percent from 0.8 percent in June and now forecasts an average inflation rate of 3.0 percent this year and 2.5 percent in 2027. The central bank's benchmark deposit rate has been raised to 2.5 percent, the upper end of its 'neutral' range.