The European Central Bank raised borrowing rates due to energy-related inflation. Inflation has risen since the US-Israeli war began.
Key facts
- •The ECB raised borrowing rates by 0.25 percent on Thursday (11 June).
- •Inflation has risen steadily since the US-Israeli war began in February.
- •The bank projects inflation this year to average three percent.
- •The cost of services rose faster in recent months, from 3 to 3.5 percent.
The European Central Bank (ECB) raised borrowing rates by 0.25 percent on Thursday (11 June) due to energy-related inflation. ECB president Christine Lagarde stated that the bank has endured a major energy shock. Inflation has risen steadily since the US-Israeli war began in February.
By the numbers
Inflation Projections
The bank projects inflation this year to average three percent, or 2.5 percent if energy and food prices are stripped out. The cost of services like haircuts, restaurant meals, plumbers, and hotel stays also rose faster in recent months, from 3 to 3.5 percent, suggesting price pressures are spreading beyond just energy and food.
Uncertainty and Scenarios
The challenge the bank faces is deep uncertainty about where inflation and growth are heading, since both depend on how long the war lasts and how severe the energy shock turns out to be. The bank's three updated staff scenarios, published on Thursday, range from mild, adverse, and severe. ECB board member Isabel Schnabel said last month that the energy shock has already 'moved beyond the adverse scenario which assumed a rapid normalisation of oil prices.'
This article was independently rewritten by ManyPress editorial AI from reporting originally published by EUobserver.
