(AA Photo)
The European Central Bank raised interest rates on Sept. 10 to cool inflation that is being fed by high oil prices from the Iran war.
The decision was supported by a stronger-thanexpected economy that suggests businesses can weather the higher borrowing costs.
The central bank for the 21 EU member countries that use the euro currency raised its benchmark rate by a quarter percentage point to 2.5 percent at a meeting held in Berlin, away from the bank’s Frankfurt headquarters. The bank last raised rates at its June 11 meeting, then hit pause at its July 23 session.
Inflation concerns are also weighing on the U.S. Federal Reserve, whose ratesetters next meet Sept. 15-16. Fed Chair Kevin Warsh has said the bank may have “more work to do” to contain U.S. inflation of 3.7 percent.
High energy prices are one reason eurozone inflation came in at 3.3 percent in August, above the bank’s target of 2 percent.
Decisions being made about borrowing costs are complicated by the fact that it’s impossible to say how long the shipping restrictions and high oil prices will last.
Higher rates cool inflation by making it more expensive to borrow and buy things, from houses to new factories. That reduces demand for goods and eases pressure on prices. The ECB benchmarks affect banks first, and through them lending rates throughout the economy.
