ECB Hikes Interest Rates as Energy Shock Persists
The European Central Bank (ECB) has raised its key interest rates by a quarter percentage point in response to higher inflation driven by an energy shock. The deposit facility rate has been increased to 2.50%, and the main refinancing rate and marginal lending facility have also risen to 2.65% and 2.90%, respectively.
The move, which is the ECB's second increase this year, follows a pause in July when policymakers sought more evidence about the duration and effects of the energy-price shock. The decision aims to moderate demand and signal that the ECB will defend its price-stability mandate despite resilient euro-area growth.
Energy costs have driven inflation higher, with annual price growth accelerating to 14.3% in August. Eurostat's flash estimate showed a more restrained picture elsewhere, with services inflation easing to 3.0% and food prices increasing by 1.2%. Inflation excluding energy and food edged down to 2.4%, according to the ECB.