The ECB raised the deposit rate 25bps to 2.50% on Thursday — its second hike
since the Iran war broke out in February — saying inflation will remain well
above the 2% target for an extended period. The move was in line with
expectations of almost all economists surveyed. The bank reiterated it will not
pre-commit to further action and will decide on a meeting-by-meeting basis. ECB
said the Middle East conflict continues to add inflationary pressure; the
The outlook is highly uncertain, with upside risks to inflation and downside risks
to growth. Thursday’s step leaves euro-area policymakers further ahead of peers
in responding to an energy-price surge that has produced the fastest inflation
in nearly three years. Traders expect two more ECB hikes by mid-2027. By
In contrast, the Fed and the Bank of England have not tightened in response to the
Middle East hostilities and may remain on hold next week.
