The European Central Bank raised its interest rate for the first time in three years.

The European Central Bank became the first major central bank to reverse the cycle and raise interest rates after three years of gradual cuts.

The bank raised the rate from 2% to 2.25% amid market turmoil caused by the war with Iran and the closure of the Strait of Hormuz, which led to rising inflation.

According to investors, the regulator will raise the rate at least once more before the end of the year.

Before the war, the ECB had been expected to keep rates at 2% for the entire year, but the war changed those plans: the European economy has been hit significantly harder than the US, which is benefiting from a wave of investment in AI and a surge in energy exports.

The ECB could afford to act faster also because the rate in the eurozone was initially at a level that economists define as neutral, that is, not restraining or stimulating growth.

By Editor

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