Arabic version: البنك المركزي الأوروبي يرفع سعر الفائدة على الودائع إلى 2.5%

According to Cnbc, the European Central Bank raised its key deposit rate by 25 basis points to 2.5% from 2.25%, a decision widely expected by investors. Markets had priced in a 100% chance of the increase ahead of the meeting, according to LSEG data.

The ECB’s Governing Council said the outlook remains highly uncertain, with upside risks to inflation and downside risks to economic growth. It cited a broad range of possible growth and inflation outcomes stemming from the energy shock, including its duration and possible second-round effects.

Eurozone inflation reached 3.3% in August, while energy inflation surged to 14.3%. As a net importer of energy, the euro zone has experienced inflation above the ECB’s 2% target since the U.S.-Iran war threatened commodity transit through the Strait of Hormuz, pushing oil prices higher and leaving them volatile.

The ECB expects baseline inflation excluding energy and food to reach 2.5% in 2026, 2.6% in 2027 and 2.3% in 2028. Government borrowing costs have also risen sharply, with European bond yields reaching multi-decade highs as investors priced in higher inflation and further rate increases.

ECB officials have said they will take a meeting-by-meeting approach to monetary policy. Felix Feather, an economist at Aberdeen, said there remains a path to a protracted hold at 2.5%, though he said that would probably require the U.S. and Iran to de-escalate tensions to ease energy markets. A Deutsche Bank client survey found no consensus on the end point of the hiking cycle, with views split between a 2.5%, 2.75% and 3% terminal rate.