Iran War Fuels Inflation, ECB Expected to Raise Rates by Quarter Point This Week

(Central News Agency, Frankfurt, 8th, Combined Foreign Reports) The Iran war has caused energy prices to skyrocket, pushing up inflation. Experts expect the European Central Bank (ECB) to raise interest rates by a quarter point this week, which would be the first rate hike by the ECB in two and a half years.

The European Central Bank has kept borrowing costs unchanged for some time, mainly because price increases in the eurozone have been largely under control. The situation is now different. The United States and Israel have launched a war against Iran, and Iran has retaliated by blocking the Strait of Hormuz, leading to a sharp rise in global energy prices and further fueling inflation.

The consumer price index (CPI) for the 21 countries of the eurozone accelerated to 3.2% in May, above the ECB's 2% target.

Analysts expect that when the ECB's monetary policy committee meets on the 11th, it may raise the benchmark deposit rate by 0.25 percentage points, from the current 2% to 2.25%.

Carsten Brzeski of ING said, "If this ECB meeting decides not to raise rates, that would be a real surprise."

Major central banks, including the U.S. Federal Reserve (Fed) and the Bank of England, have kept rates unchanged so far, as they are still assessing the impact of the Iran war.

Last month, the European Union sharply revised down its 2026 economic growth forecast for the eurozone from 1.2% to 0.9%. In addition, the eurozone economy in the first quarter of this year was revised down from an initial estimate of 0.1% growth to a contraction of 0.2%. (Editor: Ji Jinling) 1150608