ECB to hike rates as Iran war fuels fresh inflation fears
Policy makers expect higher energy costs to keep inflation above target and push the ECB toward another quarter-point increase.
- On Thursday, the European Central Bank raised its benchmark deposit rate by 25 basis points to 2.50%, seeking to curb energy-driven inflation triggered by the Iran war.
- Attacks linked to the U.S.-Iran conflict disrupted shipping through the Strait of Hormuz, pushing Brent crude above $100 per barrel and driving eurozone inflation above the bank's 2% target.
- ECB President Christine Lagarde stated that "inflation is set to remain well above target for an extended period," while markets price in additional rate hikes throughout next year.
- Long-Term bond yields have reached levels unseen since before the global financial crisis, raising borrowing costs for tracker mortgage customers and reflecting tightening financing conditions across the eurozone.
- Lagarde confirmed she will remain at the institution until October 31, 2027, as the bank noted the economic outlook remains "highly uncertain" with risks to both inflation and growth.
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