FRANKFURT, Germany (AP) — The European Central Bank raised interest rates Thursday to cool inflation that is being fed by high oil prices from the Iran war. The decision was supported by a stronger-than-expected 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 2.50% at a meeting held in Berlin, away from the bank’s Frankfurt headquarters.
Bank President Christine Lagarde said at her news conference that “the conflict in the Middle East continues to generate inflation pressures, and inflation is set to remain well above target for an extended period.”
“The outlook remains highly uncertain, with risks to the upside for inflation and to the downside for economic growth,” she said, adding that the bank would make future rate decisions meeting by meeting based on incoming data. She said the central bank would not commit to any particular path for rates before seeing the data.
The bank last raised rates at its June 11 meeting, then hit pause at its July 23 session. Remarks by ECB President Christine Lagarde later Thursday will be parsed by market analysts and investors for clues about whether more interest rate increases are coming.
Inflation concerns are also weighing on the U.S. Federal Reserve, whose rate-setters 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%.
High energy prices are one reason eurozone inflation came in at 3.3% in August, above the bank’s target of 2%. Oil prices have risen above $100 per barrel due to lower tanker traffic through the Strait of Hormuz that are under threat of Iranian attack. 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.
The ECB's move was “a hike to stay ahead of the curve, demonstrating the ECB’s high level of vigilance, and an attempt to prevent higher energy prices from feeding through to the broader economy,” Carsten Brzeski, global head of macro at ING bank, wrote in an email.
FILE - Clouds cover the sky over the headquarters of the European Central Bank in Frankfurt, Germany, Thursday, Sept. 11, 2025. (AP Photo/Michael Probst, File)
President Donald Trump has pledged to send every American adult $5,000 if Republicans retain control of the House and Senate in the midterm elections. The dubious promise would likely cost more than $1 trillion and require congressional approval, and would further exacerbate the country’s nearly $1.8 trillion annual budget deficit and concerns about inflation.
Trump also said Wednesday that oil prices that have surged because of the Iran war likely won’t come down until after U.S. midterm elections. The comments were a striking acknowledgment from Trump about the conflict as his Republican administration faces mounting pressure to address high gas prices as the war in Iran grinds on with no conclusion in sight.
Here's the latest:
Kansas Sen. Roger Marshall, who’s attending the GOP midterm convention as he seeks his second term, is among the Republicans embracing Trump’s proposed payout to American adults.
“Comment how you will spend your $5,000 Trump Dividend when Republicans win in November,” he posted on X, eliciting mostly positive responses from his online followers.
Kansas has not elected a Democrat to the U.S. Senate since the 1932 wave election in the Great Depression. But Marshall faces a surprisingly energetic challenge for reelection from Democratic nominee Adam Hamilton, pastor of the nation’s largest United Methodist congregation.
Marshall did not expound on the cost of Trump’s idea or how it should be carried out legally. The president doesn’t have appropriations power under the Constitution. That power rests with Congress.
The price of U.S. crude oil rose above $100 for the first time Thursday since May with no end in sight in the U.S.-Iran war.
The price for Brent crude, the international standard, rose above $105 a barrel. U.S. stock futures fell, with the S&P 500 down 0.5% and the Nasdaq off by 1.1%.
A report showed that inflation in the U.S. remains stubbornly high on the wholesale level.
Meanwhile, the European Central Bank raised its key interest rate by one-quarter point to try to tame inflation in the European Union. Stock indexes in Europe fell, with Germany’s DAX down 0.7%.
Market in Asia closed lower with the exception of Japan.
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The theoretical $5,000 payments Trump pitched would mean money going directly in Americans’ wallets. But Americans’ also are on the hook for an indirect outlay that’s almost as much: interest payments on the U.S. debt.
The national debt recently crossed the $40 trillion mark. Each year, the federal government pays interest to the investors who’ve financed that debt.
According to Treasury Department data, that interest expense for fiscal year 2026 will come to about $1.27 trillion. Using the Census Bureau’s 2026 population estimate of 340.3 million people, that comes to a per capita share of $3,732 or almost three-quarters of the payout Trump pitched.
Marc Goldwein, the senior policy director at the Committee for a Responsible Federal Budget, a think tank in Washington, said Trump has no authority to send money to Americans without approval from Congress.
Goldwein added that dividends are something companies pay when there’s a surplus, but the U.S. is running $2 trillion annual deficits and has $40 trillion in debt.
“The idea that we’ve had fiscal success is backwards and bordering on laughable,” he said. “We don’t have surpluses to give away.”
A federal judge has allowed Missouri’s top court to proceed with a contempt hearing Thursday for Republican Secretary of State Denny Hoskins in a tense and twisting legal battle over whether new congressional districts supported by President Trump can be used in the November election.
Missouri’s top court previously ordered Hoskins not to use a Trump-backed map in the general election. But U.S. District Judge Stephen Clark on Tuesday barred Hoskins from using anything other than the new map Trump supports.
The state Supreme Court then ordered Hoskins to appear for a contempt hearing Thursday for not following its orders.
State attorneys representing Hoskins had asked Clark to halt the contempt hearing. But Clark declined to do so.
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Joe Londsdale, a prominent Republican donor and activist, is among the Trump allies panning the president’s latest promise to send money directly to Americans.
“I am hugely in favor of winning the midterms, and love much about this (administration),” he wrote on X, “but am strongly against bread and circus bribes.”
It’s not just Republicans descending on Dallas for the midterm convention — Democrats are there too as they try to convince voters that the reality of Donald Trump’s second presidency doesn’t match the spectacle of his made-for-TV event.
“This bizarre Republican midterm convention here can’t paper over the fact that Republicans have done nothing to earn your vote,” Illinois Gov. JB Pritzker, a potential 2028 presidential contender, said Wednesday morning.
Besides Pritzker, several leading House Democrats were traveling to Dallas for events, as well. And Texas Democrats hope the spotlight on the state ends up benefiting their candidates.
James Talarico, a Texas state lawmaker who's running against state Attorney General Ken Paxton in a closely watched Senate race, held a food drive Wednesday at Friendship West Baptist Church in Dallas. He compared volunteers’ work with Republicans’ festivities.
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Trump said Wednesday that oil prices that have surged because of the Iran war likely won’t come down until after U.S. midterm elections.
Oil prices on Wednesday jumped more than 3%, pushing international Brent crude past the $100 threshold for the first time since July as salvos between the U.S. and Iran escalated.
“Right after the election, oil prices are going to be tumbling downward,” Trump said. “I think it’s going to take a little bit longer than the midterm.”
The comments were a striking acknowledgment from Trump about the conflict as his Republican administration faces mounting pressure to address high gas prices as the war in Iran grinds on with no conclusion in sight.
Trump, in an exchange with reporters before traveling to Dallas for the midterm Republican convention, added that he believes Iran will finally relent after the pivotal elections are held in the U.S.
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President Donald Trump pledged Wednesday to send every American adult $5,000 if Republicans retain control of the House and Senate in the midterm elections, an extraordinary gambit to reverse his party’s sagging fortunes in November.
The dubious promise would likely cost more than $1 trillion and require congressional approval, and would further exacerbate the country’s nearly $1.8 trillion annual budget deficit and concerns about inflation.
“If the Republicans win, you win with us and you get $5,000,” Trump said during the GOP’s midterm convention in Dallas. “It will be called the Trump Dividend.”
He likened the payments to a corporation’s distributions to shareholders, citing “our tremendous strength and success economically.”
Within an hour, Vice President JD Vance appeared to try to walk back Trump’s proposal — at least in part — by suggesting the dividend payments would not go to the wealthy. Vance suggested it could be paid for by U.S. tariff revenues, though the suggested payment dwarfs what the U.S. has taken in through the protectionist measures.
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President Donald Trump leaves the RNC Midterm Convention, Wednesday, Sept. 9, 2026, in Dallas. (AP Photo/Jacquelyn Martin)
President Donald Trump attends the RNC Midterm Convention, Wednesday, Sept. 9, 2026, at the American Airlines Center in Dallas. (Eric Lee/Pool photo via AP)
President Donald Trump speaks at the Republican convention, Wednesday, Sept. 9, 2026, in Dallas. (AP Photo/Julia Demaree Nikhinson)
