ECB Prepares First Interest Rate Hike After Iran’s War for Its Impact on Prices
Policymakers are expected to cite a 3.2% inflation rate in May and rising energy costs as they signal a short tightening cycle.
- On Thursday, the European Central Bank is expected to raise interest rates by 25 basis points to 2.25%, aiming to curb inflation currently exceeding the bank's 2% target in the 21-country currency bloc.
- Surging energy costs triggered by the Iran war have prompted policymakers to manage inflation expectations, fearing the impact will spread broadly across the euro zone economy.
- Several ECB watchers characterized the expected move as an "insurance hike," while President Christine Lagarde described it as a "measured adjustment" to address the inflation overshoot.
- Chief Economist Philip Lane noted the Iran-related shock may have broader scope than the Ukraine crisis, while financial markets expect two additional rate increases over the next year.
- Economists remain split on tighter policy due to weak economic growth, with senior economist Henry Cook at broker MUFG stating the ECB will "retain plenty of flexibility amid elevated uncertainty.
92 Articles
92 Articles
Expected a rate cut, don't think it's long-term vision says Orsini
Confindustria President Emanuele Orsini said Thursda he had expected a rate cut from the European Cnetral Bank and not a quarter point hike and said this did not reflect a long-term vision on the part of ECB Chair Christine Lagarde in raising the main rate... (ANSA)
Three major policy interest rates raised by 0.25 percentage points each… Deposit rate set to 2.25% "Middle East war causes inflationary pressure… stabilization expected only in the second half of next year" Inflation forecast raised from 2.6% to 3.0%, growth forecast lowered from 0.9% to 0.8% (Berlin=Yonhap News) Correspondent Kim Gye-yeon
In order to curb inflation at 3.2% in the euro area in May, the ECB announced that it would raise its rates by a quarter of a point on Thursday 11 June. While this increase is considered to be precipitated, the Frankfurt institution fears an inflationary spiral.
ECB raises rates to tackle inflation surge
The European Central Bank has raised interest rates for the first time in nearly three years to counter inflation linked to the Iran war. Policymakers in Frankfurt lifted the benchmark deposit rate by 0.25 percentage points to 2.25%, ending a long pause after seven consecutive holds at 2.0%. The last rate hike in the eurozone came in September 2023. Higher rates typically make borrowing more expensive for households and businesses, helping to cu…
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