European Central Bank Raises Interest Rates to 15-Month High Amid Inflation Fears

The European Central Bank (ECB) has raised its key interest rate to 2.5%, the highest level in over a year, in response to rising inflation. This marks the second rate hike since February, a period that saw a regional war ignite following attacks on Iran by the United States and Israel, which caused a sharp increase in global energy prices.

The ECB anticipates inflation will remain above its 2% target until at least 2028. In August, inflation in the Eurozone climbed to 3.3%, the fastest pace in nearly three years, largely driven by soaring energy costs. Concerns are mounting about the upcoming winter, as the continent has relatively low gas reserves for this time of year. Heating and industrial costs are expected to surge if significant additional purchases are needed at record prices.

Major central banks worldwide are under pressure to address the situation. Policymakers at the U.S. Federal Reserve, the Bank of England, and the Bank of Japan are scheduled to meet soon, with most markets expecting further interest rate hikes from these institutions.

Despite the inflation data, the Eurozone economy showed surprising resilience, growing by 0.6% in the second quarter, according to the "New York Times." The ECB projects 0.9% growth for the current year and 1.4% in 2027. However, market economists note that at 2.5%, the interest rate is already at the upper end of the "neutral range," suggesting that further increases in the near future may face higher thresholds.