ECB Hikes Rates Again Amid Ongoing Middle East Conflict
The European Central Bank (ECB) has raised its interest rates by 0.25% to 2.5%, citing the ongoing war in Iran as a key factor driving inflation in the eurozone.
This is the second increase in three months, following a rate hike on June 11th. The main refinancing rate has also risen to 2.65%, while the marginal lending facility rate increased to 2.9%.
The ECB stated that the conflict in the Middle East continues to generate inflationary pressures, with headline inflation expected to remain elevated at around 3% for some time. The August inflation reading showed an increase to 3.3%, the highest level since September 2023, while energy inflation rose to 14.3% due to fighting around the Strait of Hormuz.
However, core inflation, which excludes energy, food, alcohol, and tobacco, fell to 2.4%. ECB President Christine Lagarde had previously highlighted this measure in July, saying that 'the burden of proof is on the data.'