ECB Raises Interest Rates to Combat Inflation Fueled by Iran War

The European Central Bank (ECB) raised interest rates for the second time this year to combat inflation, which has surged past 3% in the euro zone. The increase in interest rates is aimed at taming the inflation rise driven by higher energy costs from the Iran war.

Surging oil and natural gas prices have pushed inflation beyond the ECB's 2% target, and a recent escalation of the conflict points to 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.