ECB raises interest rates for first time since 2023 amid Iran-war inflation pressure

FRANKFURT, Germany — The European Central Bank on Thursday became the first major central bank to raise interest rates in response to the Iran war as policymakers around the world including new U.S. Federal Reserve Chair Kevin Warsh wrestle with how to confront the inflation fed by sharply higher oil prices. The ECB’s rate-setting council raised its benchmark rate to 2.25 percent from 2 percent, where it had been for a year. The move comes ahead of rate-setting meetings next week at the Fed, the Bank of Japan and the Bank of England. Oil prices have risen sharply due to Iran choking off the flow of crude oil through the Strait of Hormuz, the sea passage for a fifth of the world’s oil and fuel products during normal times. Raising rates aims to dampen the consumer price inflation fed by higher costs for products made from crude such as gasoline, diesel fuel, cooking gas and heating oil. International benchmark Bent crude was trading just below $92 per barrel on Thursday, up from around $73 on the eve of the war. That has helped push inflation to 3.2 percent in May in the 21 countri

The European Central Bank also raised its inflation forecasts and cut its growth outlook.

The ECB raised its deposit rate to 2.25%, becoming the first major central bank to tighten policy after the energy shock.

As expected the central bank increased rates to 2.25%

The European Central Bank raised interest rates for the first time in almost three years, concluding it can no longer ignore the upswing in inflation caused by the Iran war. The deposit rate was lifted to 2.25% from 2%. Bloomberg's Oliver Crook reports from Frankfurt. (Source: Bloomberg)

The European Central Bank (ECB) on Thursday became the first major central bank to hike interest rates in response to the Iran war as policymakers wrestle with how to confront the...