The European Central Bank (ECB) decided on Thursday to raise key interest rates in the eurozone by 25 basis points, amid inflation that continues to fail to return to the 2% target and a new wave of price pressure caused by the escalation of hostilities in the Persian Gulf. The war was initiated by Americans and Israelis against Iran, leading to a new energy shock.
The reference rate for the single currency thus stands at 2.5% after the second increase since the beginning of the conflict. The decision was widely expected, with the market already pricing in this move. The market is now divided on what the next steps in European monetary policy will be, with investors leaning towards another rise by year-end and analysts projecting that this increase does not mark a new tightening cycle.
Inflation in the eurozone continues to show no signs of slowdown and even accelerated again in the most recent reading, in August, when it rose from 2.9% to 3.3%, the highest value since September 2023. The energy component was again the main driver of the increase, with energy inflation reaching 14.3%, a high since January 2023.
