ECB Hikes Interest Rates Amid Euro Zone Inflation Surge

The European Central Bank (ECB) raised interest rates for the second time this year to combat inflation in the euro zone, which has surged due to higher energy costs stemming from the Iran war.

Surging oil and natural gas prices have pushed inflation well past 3% across the 21-country euro zone last month, far exceeding the ECB's 2% target. The ECB raised its benchmark deposit rate to 2.5%, reaching the upper end of its neutral range.

The central bank 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.