The European Central Bank has raised interest rates for the first time in nearly three years to counter inflation linked to the Iran war.
Policymakers in Frankfurt lifted the benchmark deposit rate by 0.25 percentage points to 2.25%, ending a long pause after seven consecutive holds at 2.0%.
The last rate hike in the eurozone came in September 2023. Higher rates typically make borrowing more expensive for households and businesses, helping to curb demand and ease price pressures, while offering improved returns for savers.
At the same time, tighter policy risks are weighing further on an already weak economy. The ECB has been facing a delicate balance between containing inflation and avoiding a deeper economic slowdown.
Inflation has been creeping up, with oil prices rising as Iran chokes off the flow of crude oil through the Strait of Hormuz.
