ECB raises eurozone interest rates for first time since 2023, citing Middle East war
9 reported
The European Central Bank has increased borrowing costs across the eurozone for the first time since September 2023, raising interest rates by a quarter of one percentage point. The ECB’s governing council voted unanimously to hike rates after eurozone inflation rose to 3.2% last month, as the Middle East crisis pushed up energy costs. The rate on the ECB’s deposit facility rose to 2.25% from 2%, the main refinancing operations rate increased to 2.4% from 2.15%, and the marginal lending facility rate rose to 2.65% from 2.4%. ECB President Christine Lagarde warned that the ongoing Iran war is threatening the eurozone’s growth outlook, stating that risks to growth are to the downside mainly owing to the war in the Middle East. Several economists warned that today’s rate hike may not be the last in 2026, with some expecting further tightening may be required this year. Lagarde also noted that the ECB is taking steps to ensure it is safe from potential intrusion and hacking attacks related to new AI developments.
What’s reported
The ECB raised interest rates by 25 basis points, the first increase since September 2023.
Eurozone inflation rose to 3.2% last month, driven by the Middle East crisis pushing up energy costs.
The deposit facility rate increased to 2.25% from 2%.
The main refinancing operations rate increased to 2.4% from 2.15%.
The marginal lending facility rate increased to 2.65% from 2.4%.
The decision to raise rates was unanimous, according to Lagarde.
Lagarde warned that the Iran war is threatening the eurozone’s growth outlook, with risks to the downside.
Several economists, including Holger Schmieding of Berenberg and Alex Nairn of the Centre for Economics and Business Research, indicated further rate hikes may occur in 2026.
Lagarde said the ECB is taking steps to ensure safety from potential intrusion and hacking attacks related to AI developments.
Key figures
Christine Lagarde, President of the European Central Bank
Holger Schmieding, chief economist at Berenberg
Alex Nairn, economist at the Centre for Economics and Business Research
Neil Birrell, CIO of PremierMiton
Sources: The Guardian
