ECB Raises Rates by 25 Basis Points as Middle East War Fuels Inflation Concerns

The European Central Bank raised its three key interest rates by 25 basis points, citing inflation concerns stemming from the war in the Middle East.

Following a monetary policy meeting in Frankfurt, the ECB said on June 11 it would lift the deposit rate to 2.25% from 2.00%. It also raised the main refinancing rate to 2.40% and the marginal lending rate to 2.65%.

The increase is the ECB's first since September 2023, after a two-year, nine-month pause. The central bank said the war in the Middle East was creating upward pressure on prices and that the decision would leave it well positioned to navigate the uncertainty caused by the conflict.

The move narrowed the gap between the ECB's deposit rate, the bank's benchmark for monetary policy, and South Korea's benchmark rate of 2.50% to 25 basis points. The spread with the US policy rate of 3.50% to 3.75% narrowed to 1.25 to 1.50 percentage points. The new rates will take effect on June 17.

Hankyung.com reporter 2su@hankyung.com