ECB raises interest rates for the first time in nearly three years

The European Central Bank (ECB) on the 11th held a regular board meeting to discuss monetary policy for the Eurozone and decided to implement an interest rate hike for the first time in approximately two years and nine months.

Amid growing concerns about accelerating inflation triggered by the surge in crude oil prices following the military conflict between the US and Iran, the central bank will raise the central bank deposit rate, one of the key policy interest rates applied when private banks deposit funds with the ECB, by 0.25% to 2.25%.

This is the first interest rate hike decision by a major central bank in the US, Japan, and Europe since the US attacked Iran at the end of February, which worsened the situation in the Middle East.

In its statement, the ECB expressed caution, stating, "The economic outlook remains uncertain, with upside risks to inflation and downside risks to economic growth." It added that the impact of the conflict in the Middle East on the Eurozone economy "depends on the strength and persistence of the energy price shock," and indicated that policy will be judged at each meeting based on indicators.

In May, the Eurozone consumer price index rose 3.2% year-on-year, with the increase expanding for four consecutive months against the backdrop of rising energy prices. On the other hand, Eurozone real GDP (gross domestic product) in the January-March quarter decreased by 0.2% from the previous quarter, falling into negative territory, and uncertainty about the economic outlook is increasing.