The European Central Bank raised key interest rates in the eurozone on Thursday for the first time since September 2023. It thus responded to an acceleration in consumer price growth, which, according to available information, was fueled by an oil shock following the war with Iran. Tagesschau ↗
The deposit rate was raised from 2.0 to 2.25 percent. Inflation in the eurozone reached 3.2 percent in May, the highest level since October 2023. With this step, the central bank tightened monetary policy, as higher energy prices and the consequences of the fighting in the Middle East are burdening both businesses and consumers. Die Zeit ↗
The ECB also expects higher inflation and weaker economic growth because of the war. The decision therefore comes at a time when monetary policy is moving between the pressure to curb prices and the risk of weakening the economy. According to available information, the move is not being unanimously welcomed among experts. Tagesspiegel ↗
Both households and businesses may feel the effects of the decision. Housing loans could become more expensive, while interest on overnight or short-term deposits is expected to rise only slightly. Further developments will depend mainly on energy prices, the duration of the conflict in the Middle East, and on whether the inflationary pressures in the eurozone prove to be temporary or more long-lasting. Die Zeit ↗
ECB Raises Interest Rates as Inflation Grows in the Eurozone
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