ECB Hikes Rates Again Amid Ongoing Energy Price Pressures
The European Central Bank (ECB) raised interest rates for the second time this year on Thursday, aiming to combat inflation driven by higher energy costs stemming from the Iran conflict. The ECB's benchmark deposit rate is now at 2.5%, marking the upper end of its 'neutral' range.
According to the ECB, surging oil and natural gas prices pushed inflation above 3% across the 21-country euro zone last month, exceeding its 2% target. The conflict's recent escalation has led the ECB to project higher price pressures that could eventually influence wage-setting.
The outlook remains uncertain, with risks to the upside for inflation and downside for economic growth, as per the ECB. Despite this, financial investors are betting on further hikes later this year and in 2027, but the ECB is likely to take its time with any follow-up move.