ECB Raises Interest Rates Amid Eurozone Economic Growth

The European Central Bank (ECB) has announced a monetary policy decision to raise three key interest rates by 25 basis points. The deposit facility, main refinancing operations, and marginal lending facility will now have interest rates of 2.50%, 2.65%, and 2.90% respectively.

The ECB cited the European economy's growth in Q2 2026 as a reason for the rate hike. The economy grew due to contributions from AI-related activity in digital services, business investment, and exports. Manufacturing has held up with government investment in infrastructure and defence. Consumer confidence has improved, supporting the services sector's recovery from the initial energy shock.

However, economic growth is expected to remain modest in the near future. The base line projection for economic growth has been revised up to 0.9% in 2026, 1.4% in 2027, and 1.5% in 2028, reflecting the resilience of the euro area economy.

The labour market remains robust, with unemployment unchanged at 6.4% in July. Growth in employment and the labour force continues to slow, while productivity has gradually picked up.