Europe Raises Interest Rates as War Stokes Inflation

The European Central Bank raised interest rates on Thursday, becoming the first major central bank to act to rein in rising inflation set off by the war in the Middle East.European policymakers, who set rates for the 21 countries that use the euro, are moving more quickly than officials in other major economies, such as the United States and Britain, because the war has jolted inflation in the region from a relatively comfortable position.The E.C.B.

lifted its key rate by a quarter point, to 2.25 percent.It was the central bank’s first increase since September 2023, having cut rates eight times in 2024 and 2025.Before the war, inflation in the eurozone was close to the bank’s 2 percent target.

By May, it had jumped to 3.2 percent.Now, officials warn it will be “well above” target into the first half of next year as higher energy prices also feed through into higher prices for food, other goods and services.“We are beginning to see a broadening of inflation throughout the economy,” Christine Lagarde, the president of the central bank, said in a news conference on Thursday in Frankfurt.Since the outset of the war in the Middle East, the closure of the Strait of Hormuz — a critical waterway for energy, fertilizers and other commodities off Iran’s southern coast — has pushed up inflation around the world.

But those rising costs are weighing on economic growth, leaving central bankers to balance the risks of higher inflation against those of a slowdown.Central banks in a few other countries, including South Africa, Australia and Norway, have raised rates since the war began in late February.The Bank of Japan is expected to raise rates next week for the first time since December.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access.

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