ECB Hikes Interest Rates Amid Eurozone Inflation Fueled by Middle East Conflict

The European Central Bank (ECB) has raised interest rates by 25 basis points to combat rising eurozone inflation, driven in part by the ongoing Middle East conflict. The key deposit facility rate is now at 2.5%, a move that follows August's headline consumer price growth reaching its highest level since September 2023.

The main refinancing operations rate has been increased to 2.65%, while the marginal lending facility rate is now at 2.90%. The ECB noted in a statement that the conflict continues to exert pressure on inflation, with prices expected to remain above target for an extended period.

Inflation rates have indeed picked up pace, hitting 3.3% year-on-year in August, up from 2.9% in July. This decision aims to put the ECB 'in a good position to navigate the uncertainty surrounding the conflict.'