The European Central Bank (ECB) announced on Thursday that it will hike the key interest rates by 25 basis points.
As geopolitical conflicts linger on and energy prices are hovering at high levels, the ECB raised the three key interest rates and also revised up its inflation projections for 2027 and 2028, signaling higher inflation risks.
Hardly providing any guidance about its next move, the ECB is insisting on a meeting-by-meeting approach.
The latest rate hike will push the interest rate on the deposit facility through which the ECB steers its monetary policy up to 2.5 percent. The interest rates on the main refinancing operations and the marginal lending facility will be increased to 2.65 percent and 2.9 percent respectively.
It is the second time that the central bank has raised interest rates since September 2023. The ECB hiked interest rates by 25 basis points in June this year.
In its last easing cycle, the ECB cut interest rates by a total of two percentage points in 13 months since June 2024, bringing the interest on the deposit facility down to 2 percent from 4 percent.
The aggressive rate cuts among other measures successfully tamed the stubborn inflation in the euro area, putting the ECB in “a good position” in most of 2025 when inflation was staying around 2 percent.
“The outlook remains highly uncertain, with risks to the upside for inflation and to the downside for economic growth,” the ECB said in a statement.
The euro area inflation edged up to 3.3 percent in August from 2.9 percent in July, according to the statistical office of the European Union.
The inflation surge was attributed largely to energy prices, which soared by 14.3 percent in August on an annual basis and 2.9 percent compared with July.
