ECB Raises Rates to Combat Eurozone Inflation

The European Central Bank (ECB) has raised its key interest rates to combat rising inflation in the eurozone. The deposit rate, a central benchmark for money markets, increased by 25 basis points to 2.50%.

This is the second rate hike of the year, and it aims to curb inflation, which surged above the 2% target due to energy price increases. Annual inflation in the eurozone accelerated to 3.3% in August, with energy prices rising by 14.3% year-on-year.

The ECB believes that tensions in the Middle East continue to fuel inflationary pressures and expects average inflation to remain above its target for an extended period. However, it notes that wages have not shown a significant response to the energy shock at this stage.