ECB raises rates for the second time this year amid rising inflation
The European Central Bank, following its annual meeting in Berlin, Germany, raised interest rates in an attempt to curb inflation in the eurozone, fueled by rising energy prices. This is already the ECB’s second rate hike since the beginning of the year, Deutsche Welle English reports.
Inflation and forecast
Rising oil and natural gas prices have pushed inflation in the 21 countries of the eurozone above 3%. This exceeds the ECB’s previous target of 2%.
The ECB said that the economic outlook remains highly uncertain, with risks of further inflation acceleration and slower economic growth. The bank also raised its economic growth forecast for 2026 to 0.9%, compared with 0.8% expected in June. According to the ECB’s estimate, average inflation this year will be 3%, and 2.5% in 2027.
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Energy pressure
The regulator said that the conflict in the Middle East continues to create inflationary pressure, and inflation may remain significantly above the target level for a long time. Gas storage levels are also causing additional concern, as they remain below historical norms ahead of the winter heating season.
Higher rates mean more expensive mortgages, consumer loans and other borrowing for residents of eurozone countries. At the same time, according to the report, there are few signs that inflation is being transmitted more broadly through the economy via higher prices for food, goods or services. Sylvain Broyer, S&P’s chief economist for Europe, the Middle East and Africa, noted that the inflation outlook deteriorated over the summer, while the impact of demand is increasingly likely to be added to supply shocks.
