|
The
central bank for the 21 EU member countries that use the euro
currency raised its benchmark rate by a quarter percentage point
to 2.50% at a meeting held in Berlin, away from the bank’s
Frankfurt headquarters.
Bank President Christine Lagarde said at her news conference
that “the conflict in the Middle East continues to generate
inflation pressures, and inflation is set to remain well above
target for an extended period.”
“The outlook remains highly uncertain, with risks to the upside
for inflation and to the downside for economic growth,” she
said, adding that the bank would make future rate decisions
meeting by meeting based on incoming data. She said the central
bank would not commit to any particular path for rates before
seeing the data.
The bank last raised rates at its June 11 meeting, then hit
pause at its July 23 session.
Inflation concerns are also weighing on the U.S. Federal
Reserve, whose rate-setters next meet Sept. 15-16. Fed Chair
Kevin Warsh has said the bank may have “more work to do” to
contain U.S. inflation of 3.7%.
High energy prices are one reason eurozone inflation came in at
3.3% in August, above the bank’s target of 2%. Oil prices have
risen above $100 per barrel due to threats against traffic that
typically moves through the Strait of Hormuz. Rate decisions are
complicated by the fact that it’s impossible to say how long the
obstruction of shipping and high oil prices will last.
Higher rates cool inflation by making it more expensive to
borrow and buy things, from houses to new factories. That
reduces demand for goods and eases pressure on prices. The ECB
benchmarks affect banks first, and through them lending rates
throughout the economy.
The ECB's move was “a hike to stay ahead of the curve,
demonstrating the ECB’s high level of vigilance, and an attempt
to prevent higher energy prices from feeding through to the
broader economy,” Carsten Brzeski, global head of macro at ING
bank, wrote in an email.
All contents © copyright 2026 Associated Press. All rights reserved
|
|
