European Central Bank raises rates for first time since 2023, becoming first G7 bank to hike since Iran war began

The European Central Bank just did something no other G7 central bank has been willing to do yet. It raised interest rates.

On June 11, the ECB hiked its main deposit facility rate by 25 basis points, moving from 2% to 2.25%. It’s the first rate increase from Frankfurt since September 2023, and the first tightening move by any G7 central bank since the Iran war began sending energy prices on a very unwelcome upward trajectory.

What happened and why it matters

The catalyst is straightforward: war-driven energy costs. The ongoing conflict involving Iran has disrupted oil supply routes, particularly through the Strait of Hormuz, a chokepoint that handles a massive share of global crude shipments.

ECB President Christine Lagarde didn’t mince words about the reasoning.