ECB Raises Rates Again Amid Ongoing Conflict
The European Central Bank (ECB) raised its interest rates for the second time this year to combat rising inflation caused by higher energy prices. The regulator is seeking to curb inflation, which exceeded 3% in the eurozone last month, exceeding the ECB's target of 2%. This move was expected by the market, according to Reuters.
The sharp rise in oil and natural gas prices due to the ongoing conflict has put pressure on the economy. The recent escalation of the conflict is likely to further increase price pressures, potentially affecting wage levels as well.
The ECB also raised its forecast for economic growth in 2026 to 0.9% from a previous estimate of 0.8%. Average inflation is now expected to stand at 3.0% this year and 2.5% in 2027, according to the regulator's new projections.
The ECB's benchmark deposit rate has reached 2.5%, which is the upper end of the 'neutral' range officials believe neither restrains nor stimulates economic growth. Despite market expectations of further rate hikes later this year and in 2027, the ECB is unlikely to rush into its next steps due to the uncertain economic outlook.