ECB Raises Interest Rates as Eurozone Inflation Surges Past Target

The European Central Bank (ECB) has raised interest rates for the first time since 2023 in response to rising eurozone inflation. According to a report by The Guardian, the ECB's key deposit rate was increased from 2 percent to 2.25 percent, while its main refinancing rate was raised from 2.15 percent to 2.4 percent.

The decision comes as the eurozone's inflation rate rose to 3.2 percent in May 2026, surpassing the ECB's target of 2 percent. The increase is expected to be the start of three hikes by next spring, with financial markets anticipating further action from the central bank.

ECB President Christine Lagarde noted that the outlook for inflation and economic growth remains uncertain due to the ongoing Iran war, which has pushed up energy costs. 'The full impact of the war on inflation and medium-term growth will depend on the intensity and duration of the energy price shock, as well as its indirect impact,' she said.

The ECB's move is seen as a response to criticism that it was slow to raise interest rates following the Russian invasion of Ukraine in 2022. However, some experts warn that raising interest rates too far could weigh on eurozone economic growth, which has already weakened due to rising unemployment and slowing growth.