Middle East war is hurting eurozone economy, warns ECB, after announcing first interest rate rise since 2023 – as it happened
The ECB raised its main deposit rate by 25 basis points to 2.25%, lifting the main refinancing rate to 2.4% and the marginal lending facility to 2.65%, after eurozone inflation climbed to 3.2% in May. The central bank cited the Middle East war as generating inflation pressures through higher energy costs; Denmark’s central bank immediately matched the move with a 25bp rise to 1.85%. The World Bank cut its 2026 global growth forecast to 2.5% and projected global inflation of 4%, warning of fertiliser price jumps of up to 38%. The unanimous vote and upward revisions to inflation forecasts by the ECB reinforce the expectation of two further rate rises by spring 2027, as previously signalled.
Context
The unanimous vote and upward revisions to inflation forecasts by the ECB reinforce the expectation of two further rate rises by spring 2027, as previously signalled.