The European Central Bank raised interest rates for the first time in nearly three years amid inflation concerns stemming from a U.S.-Iran war, becoming the first G7 economy to begin tightening.
On the 11th (local time), the ECB held a monetary policy meeting in Frankfurt, Germany, and raised its three key policy rates by 0.25 percentage point each. The deposit rate rose from 2.00% to 2.25% per year, while the benchmark rate (main refinancing rate) and the marginal lending rate climbed to 2.40% and 2.65%, respectively.
The ECB's rate hike marks the first such move in about two years and nine months, since September 2023. After cutting the deposit rate—its monetary policy benchmark—from 4.00% at that time to 2.00% by June last year, the ECB has shifted toward tightening just one year later.
With this rate hike, the gap between the ECB's benchmark deposit rate and South Korea's benchmark rate (2.50%) narrowed to 0.25 percentage point, while the gap with the United States (3.50–3.75%) shrank to 1.25–1.50 percentage points. The raised rates take effect on the 17th.
The ECB explained the reason for the rate hike, stating that "the war in the Middle East is generating upward pressure on prices" and that "today's decision keeps us well positioned to navigate the uncertainty arising from the war."
Meanwhile, reflecting the inflation trend, the ECB raised its forecast for this year's consumer price growth in the eurozone (21 countries using the euro) from 2.6% to 3.0%. For next year, it revised the figure upward from 2.0% to 2.3%.
The ECB slightly lowered its economic growth forecast for this year from 0.9% to 0.8%, and for next year from 1.3% to 1.2%.
