The European Central Bank (ECB) raised its key interest rates by 25 basis points following the conclusion of a two-day Governing Council meeting today. The decision was made at the German Bundesbank's training center, located on the shores of Lake Wannsee in the southwestern part of Berlin.
The interest rate on the deposit facility is now 2.50 percent, up from the previous 2.25 percent. The rate on the main refinancing operations rises to 2.55 percent, and the interest rate on the marginal lending facility reaches 2.85 percent.
This is the second interest rate hike by the ECB this year. In June, the institution raised rates by 25 basis points due to accelerating inflation sparked by the energy shock following the war in the Middle East. Although rates remained unchanged in July, the bank signaled a new increase in September due to rising oil and natural gas prices.
Markets had anticipated these changes after inflation in the eurozone reached 3.3 percent in August – the highest level in the last three years. The escalation of the conflict between the US and Iran led to a jump in energy prices and diminished hopes for a rapid normalization of shipments through the Strait of Hormuz.
Regarding forecasts for September, Peter Kažimír, Governor of the National Bank of Slovakia and member of the ECB Governing Council, acknowledged the possibility of another interest rate hike. Prior to the decision, Andrew Kenningham, Chief Europe Economist at Capital Economics, noted: "It looks certain that the ECB Governing Council will raise the deposit rate from 2.25 percent to 2.5 percent."