The European Central Bank (ECB) has increased borrowing costs across the eurozone for the first time since September 2023. The ECB’s governing council voted to raise interest rates by a quarter of one percentage point.
Policymakers hiked borrowing costs after eurozone inflation rose to 3.2% last month, as the Middle East crisis pushed up energy costs.
Announcing the decision, the ECB said: “The war in the Middle East is generating inflation pressures, and the decision to raise rates is robust across a range of scenarios mapping out how the shock might evolve and affect the medium-term outlook for the euro area.”
The increase brings the rate on the ECB’s deposit facility, which banks can use to make overnight deposits with the Eurosystem, to 2.25% from 2%. The interest rate on the ECB’s main refinancing operations, which commercial banks use to borrow funds from the ECB, rises to 2.4% from 2.15%. The rate on the marginal lending facility, which offers overnight credit to banks, increases to 2.65% from 2.4%.
