Eurozone Central Bank Raises Interest Rate to 2.5% on Thursday
The European Central Bank will hike its benchmark rate by 25 basis points this week to combat energy-driven inflation. Rising US-Iran tensions are driving up oil and gas prices, prompting fears of price shocks across the Eurozone.
The European Central Bank is set to raise its main interest rate to 2.50 percent on Thursday, increasing from the current level of 2.25 percent. This marks the second rate hike for the year as officials aim to curb a new wave of inflation primarily fueled by energy costs. Recent reciprocal attacks between the United States and Iran since late August have ended a period of relative calm. These strikes targeted military facilities and energy shipping infrastructure, causing oil and gas prices to rise again. The resulting price shock threatens economies across the Eurozone that heavily rely on imported energy. Economists expect policymakers to maintain this tightening stance if inflation does not improve. Alisia Bernardi, head of the Global Macro Division at Amundi Asset Management, noted that raising rates in September appears likely.
