ECB Raises Eurozone Interest Rates to 2.25% Due to Rising Inflation

The European Central Bank has raised interest rates for the first time in three years in an effort to contain an expected surge in inflation driven by the war in Iran.

Interest rates in the euro area have increased from 2% to 2.25%.

Following a sharp rise in oil and natural gas prices over the past month, inflation across eurozone countries has climbed above 3%, exceeding the ECB’s 2% target.

In March, the ECB also revised upwards its inflation forecast for this year to 3%, compared with a previous estimate of 2.6%. The forecast for 2027 was likewise increased to 2.3%, up from 2%.

Financial markets expect two further interest-rate increases next year. However, monetary policy tightening is anticipated to remain cautious and gradual. The European economy is already showing signs of slowing, and a sharp increase in borrowing costs would heighten the risk of recession.