On Thursday, the governing council of the European Central Bank increased the deposit facility rate from 2.25% to 2.5%. This is the second increase since the ECB made its first move in three years on June 11.
The deposit facility rate is the primary policy benchmark used by the European Central Bank (ECB) to determine monetary policy for the eurozone. The marginal lending facility was raised to 2.9% and the primary refinancing rate to 2.65%.
The central bank stated 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,” while guaranteeing that “with today’s decision, the Governing Council remains well positioned to navigate the uncertainty caused by the conflict.”
Headline inflation is expected to average 3% this year, according to ECB staff predictions. In contrast to June, the projections for 2027 and 2028 have been increased to 2.5% and 2.1%, respectively.Following an August inflation reading of 3.3%, which was the highest since September 2023 and up from 2.9% in July, the decision was made.
Energy expenses drove almost all of the change, with energy inflation rising from 10.3% to 14.3% as conflict in the Strait of Hormuz limited the flow of petroleum. Due to fresh gunfire between the US and Iran, Brent crude crossed $100 per barrel once more on Wednesday, indicating that the issue still exists.
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