La Jornada: Interest rates rise in the EU to stop inflation caused by the war in the Middle East

Frankfurt. The European Central Bank (ECB) raised interest rates yesterday for the first time in almost three years to curb inflation, before the surge in energy prices caused by the war in Iran spreads through the euro zone economy.

With Thursday’s increase, the ECB’s reference deposit rate rose from 2 to 2.25 percent, while the refinancing rate rose to 2.40 percent.

It was the first increase by a major central bank in response to the energy crisis and comes a week before the US Federal Reserve, banks in Japan and England and other institutions make their monetary policy decisions.

Inflation in the 21-country euro zone exceeded 3 percent last month, above the ECB’s 2 percent target, at a time when economic growth is weak, a context that has divided economists over the advisability of a more restrictive policy.

The unanimous decision was accompanied by higher inflation forecasts for this year and next and at the same time weaker growth forecasts. “The war in the Middle East is generating inflationary pressures and the decision to raise rates is robust under a wide range of scenarios that map out how the crisis could evolve and affect the medium-term outlook for the euro zone,” the ECB said in a statement.

IMF lowers growth forecast

The International Monetary Fund (IMF) yesterday lowered its growth forecasts for the euro zone and raised its inflation forecasts, due to the war in the Middle East. He added that the economic situation could worsen if high energy prices persist.

In its periodic report on the economy of the 21 countries that share the euro, the IMF said that economic growth this year would be 0.9 percent, less than the 1.1 percent forecast in April, while inflation would be 2.8 percent, which is higher than the previous forecast of 2.6 percent.

The IMF had already revised downwards its growth forecast for the euro area in April compared to the January prediction.