ECB Hikes Rates Again as Energy Shock Drives Eurozone Inflation

The European Central Bank (ECB) has increased interest rates to 2.5% as the eurozone inflation continues to rise due to the energy shock in the Middle East. The deposit facility rate was raised from 2.25%, marking the second hike since June 11, when the ECB first moved in three years.

The main refinancing rate and marginal lending facility were also lifted to 2.65% and 2.9% respectively. The central bank noted that inflation pressures persist due to the ongoing conflict in the Middle East and that it expects headline inflation to average 3% this year, with revised projections for 2027 and 2028 at 2.5% and 2.1%.

The energy cost hike was largely responsible for the increase in inflation, jumping to 14.3% from 10.3%. However, core inflation, which strips out energy, food, alcohol, and tobacco, actually fell to 2.4% from 2.5%, indicating that expensive energy has not yet spread into the rest of the economy.