ECB Raises Rates by 0.25% to Deposit Rate of 2.5% as Inflation Hits 3.3%
The European Central Bank increased interest rates by 0.25% amid surging energy costs and geopolitical tensions in the Middle East. Analysts predict a further quarter-point hike in December.
The European Central Bank raised its key benchmark interest rates by 0.25% on Thursday, setting the deposit rate at 2.5%. This marks the second increase in three months. Christine Lagarde stated that inflation pressures will remain well above target for an extended period. In August, Eurozone inflation accelerated to 3.3% from 2.9% in July. Energy prices contributed significantly, with annual rises of 14.3%. Brent crude climbed above $100 a barrel due to conflict between the United States and Iran disrupting the Strait of Hormuz. The Dutch TTF gas benchmark rose by 190% since January. Barclays expects another 25-basis-point increase in December, while Goldman Sachs forecasts a similar move to reach mildly restrictive territory. Traders now price a 93.9% probability of a December rate hike. Barclays projects inflation may return to the 2% target only by late 2027.
