ECB poised for first rate hike in nearly 3 years as war lifts prices
What's next: Markets expect the deposit rate to rise to 2.25%, with at least one more move possible as energy costs push inflation above 3%.
The European Central Bank is set to raise interest rates on Thursday for the first time in nearly three years, as higher energy costs linked to the Iran war add to inflation pressures across the euro zone. The expected quarter-point move would lift the benchmark deposit rate to 2.25% from 2%. Inflation in the 21-country bloc is already running above 3%, well above the ECB’s 2% target, while growth remains weak. Economists are divided over whether tightening now risks worsening the slowdown, but policymakers appear focused on preventing inflation expectations from drifting higher after their delayed response to the post-pandemic price surge in 2022. Investors are also looking for updated ECB forecasts and clues on whether another increase could come as soon as September.