The European Central Bank (ECB) is expected to raise key interest rates for the first time since 2023 on Thursday, in light of the sharp rise in consumer prices across the eurozone.
The central bank is to announce its decision on Thursday at 2:15 pm (1215 GMT). The deposit rate, which is important for savers and banks, has stood at 2% since mid-2025.
The oil price shock resulting from the war in Iran has fuelled inflation in the eurozone significantly. In May, consumer prices were 3.2% higher than the previous year, according to the statistics office Eurostat.
Inflation had already risen sharply to 3% in April. This means that the ECB’s target, which aims for an inflation rate of 2% in the eurozone in the medium term, has been significantly exceeded, and pressure on the central bank is mounting.
The war in Iran has so far driven up inflation primarily via oil prices and caused energy costs to rise rapidly, but prices for services are also rising. Economists fear that prices are rising across the board as firms pass on increased energy and transport costs to customers.
By way of comparison, inflation in the eurozone stood at 1.9% as recently as February.
ECB President Christine Lagarde has repeatedly emphasized that the central bank is ready to act if necessary.
Higher ECB interest rates would make borrowing more expensive for consumers and businesses, which could curb demand and dampen inflation.
At the same time, higher interest rates would be a burden on the weak eurozone economy, which is suffering from the consequences of the war in Iran and contracted unexpectedly in the first quarter.
