ECB Raises Interest Rates for First Time in Nearly Three Years

The European Central Bank became the first of the major central banks to raise interest rates in response to market turmoil following the war in Iran and the closure of the Strait of Hormuz. The bank raised the rate from 2% to 2.25%, the first increase in nearly three years.

The move, which markets had expected, underscores the difficulties facing major economies after the surge in energy prices since the Iranians closed the Strait of Hormuz at the beginning of March. According to investor estimates, the central bank will raise rates at least once more before the end of the year.

In doing so, the European Central Bank became the first among the major central banks to opt for tighter monetary policy in response to rising energy prices, which also pushed inflation in the eurozone above 3%. By contrast, the Federal Reserve is expected to keep rates unchanged, amid Kevin Warsh's entry as the new chairman and pressure from Donald Trump to keep rates low.