European Central Bank raises key rates by 25 basis points, second hike this year

Monetary policy is a delicate tool with which central banks try to balance curbing inflation and supporting growth. When prices rise faster than expected, decisive action is required, even if it slows the economy. The European Central Bank is taking its second step this year, signalling that the fight against inflation remains a priority.

The latest rate hike will bring the deposit facility rate, which the European Central Bank uses to steer monetary policy in the eurozone, to 2.5 percent. The main refinancing operations and marginal lending facility rates will be raised to 2.65 percent and 2.9 percent respectively. “The conflict in the Middle East continues to create inflationary pressure, and inflation is expected to remain significantly above target for a prolonged period,” the European Central Bank said in a statement.

In its latest projections released on Thursday, the European Central Bank said it now expects headline inflation in the eurozone to average 3% in 2026, 2.5% in 2027 and 2.1% in 2028. The 2026 inflation forecast remains unchanged, while the 2027 and 2028 projections were revised upwards compared with June. Meanwhile, baseline economic growth forecasts for 2026 and 2027 were raised to 0.9% and 1.4% respectively. “The outlook remains highly uncertain, with risks to both inflation and growth,” the European Central Bank said.

Eurozone inflation rose to 3.3% in August from 2.9% in July, according to data from the European Union’s statistical office. The rise was largely driven by energy prices, which increased by 14.3% year-on-year in August and by 2.9% compared with July. The eurozone economy grew by 0.4 percent in the second quarter compared with the first, beating forecasts. The European Central Bank’s latest upward revision of growth forecasts reflects “the greater-than-expected resilience of the eurozone economy,” the statement said.

As reported by CCTV+, the rate hike reflects the European Central Bank’s concern over persistently high inflation, driven in part by rising energy prices, and its readiness to act to bring inflation back to target.