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European Central Bank (ECB) President Christine Lagarde addresses the media after the ECB\u2019s Governing Council meeting, at the ECB headquarters in Frankfurt, Germany, Sept. 11, 2025. <\/p>\n
Kai Pfaffenbach | Reuters<\/p>\n<\/div>\n<\/div>\n<\/div>\n
The European Central Bank announced a quarter-point rate hike on Thursday, bringing its key interest rate to 2.25% as the Iran war continues to blow inflation off target.<\/p>\n
Markets had been pricing in a near-100% chance of the ECB raising rates by at least 25 basis points ahead of its June Governing Council meeting, according to LSEG data. <\/p>\n
The ECB\u2019s Governing Council said the decision had been made in a bid to ward off inflationary pressures generated by the U.S.-Iran war.<\/p>\n
\u201cThe 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,\u201d it said in a statement announcing the decision.<\/p>\n
The central bank also raised its inflation forecasts, saying it now expects headline inflation in the euro zone to average 3% in 2026 before cooling to 2.3% next year and 2% in 2028. <\/p>\n
It said the outlook had been altered in response to expectations of higher energy prices, which are expected to feed into the cost of food, goods and services. <\/p>\n
Economic growth forecasts, meanwhile, were revised downward for this year and next year. The ECB now expects growth in the euro zone to average at 0.8% in 2026, 1.2% in 2027 and 1.5% in 2028.<\/p>\n
Officials said the growth outlook had been trimmed to reflect \u201ca more pronounced impact of the war on commodity markets, real incomes and confidence.\u201d<\/p>\n
This is breaking news. Please refresh for updates.<\/strong><\/p>\n<\/div>\n
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