Israel-Hamas war latest: Israeli tank and drone strikes kill at least 17 in Gaza

Israeli tank and drone strikes in Gaza on Wednesday killed at least 17 people, according to hospital staff and Associated Press journalists who counted the bodies.

The strikes happened in Deir al-Balah in central Gaza and Khan Younis in the south.

Lebanon’s Hezbollah on Wednesday launched more than 50 rockets, hitting a number of private homes in the Israeli-annexed Golan Heights. Hezbollah said the attack was in response to an Israeli strike deep into Lebanon on Tuesday night.

The attacks came a day after U.S. Secretary of State Antony Blinken met with fellow mediators Egypt and Qatar as he pressed ahead with the latest diplomatic mission to secure a cease-fire in the war in Gaza, even as Hamas and Israel signaled that challenges remain. Diplomatic efforts had redoubled as fears grow of a wider regional war after the recent targeted killings of Hamas and Hezbollah leaders, both blamed on Israel, and threats of retaliation.

Meanwhile, key mediator Egypt expressed skepticism Wednesday as more details emerged of the proposal meant to bridge gaps between Israel and Hamas.

Officials in Egypt, in its unique role as both a mediator and affected party since it borders Gaza, told The Associated Press that the Hamas militant group will not agree to the bridging proposal for a number of reasons — ones in addition to the long-held wariness over whether a deal would truly remove Israel forces from Gaza and end the war.

President Joe Biden spoke with Israeli Prime Minister Benjamin Netanyahu on Wednesday and stressed the urgency of reaching a cease-fire and hostage release deal, the White House said.

Hamas is believed to still be holding around 110 hostages captured during the Oct. 7 attacks that started the war. Israeli authorities estimate around a third are dead. During the Oct. 7 attack, militants killed some 1,200 people, mostly civilians.

Israel’s retaliatory offensive has killed over 40,000 Palestinians, according to Gaza’s Health Ministry, which does not distinguish between civilians and combatants in its count. The war has caused widespread destruction and forced the vast majority of Gaza’s 2.3 million residents to flee their homes, often multiple times.

Here’s the latest:

KHAN YOUNIS, Gaza Strip — Israeli tank and drone strikes in Gaza on Wednesday killed at least 17 people, according to hospital staff and Associated Press journalists who counted the bodies.

In Khan Younis in the south, nine bodies, among them a woman and child, were rushed to Nasser Hospital. Meanwhile, the Aqsa Martyrs Hospital in Deir al-Balah received eight bodies.

The strikes in Deir al-Balah come as the Israeli military called for Palestinians in some parts of the central city to evacuate.

UNITED NATIONS – The U.N. humanitarian office is warning that mass evacuation orders by the Israeli military this month are pushing Palestinians into overcrowded and unsafe areas along the Gaza coast.

U.N. spokesman Stephane Dujarric told reporters that the latest orders issued Wednesday for part of Deir al-Balah in central Gaza and Khan Younis in the south affect 115 sites with more than 150,000 displaced men, women and children, including U.N. and many informal and makeshift shelters.

The orders also impact offices, warehouses and residences of the United Nations and humanitarian organizations, and have made three water wells serving tens of thousands of people inaccessible, he said.

“In Deir al Balah, the water supply has decreased by 70%, and there are also critical shortages of sanitation and hygiene materials,” Dujarric said.

The U.N. spokesman said Israel has issued 11 evacuation orders so far in August affecting about 250,000 people. Before August, he said, the U.N. estimated that some 90% of Gaza’s 2.1 million people had been displaced at least once since Hamas’ attacks in southern Israel on Oct. 7 that sparked the ongoing conflict.

The Israeli orders have also cut of sections of the main Salah al-Din road, a key route for delivering humanitarian aid, Dujarric said.

JERUSALEM — The outgoing head of Israeli military intelligence says the failures of Oct. 7 will haunt him for the rest of his life.

Maj. Gen. Aharon Haliva said Wednesday that he bore responsibility for the intelligence breakdowns that allowed Hamas to carry out the cross-border attack that day that sparked Israel’s ongoing war against the militant group.

Hamas-led militants killed some 1,200 people and kidnapped 250 others in the deadliest attack in Israeli history. The army has come under heavy criticism in Israel for its failure to predict the attack and its slow response that day.

Haliva announced his resignation in April.

Speaking at a handover ceremony with his successor, Haliva said the bitter memories of Oct. 7 weigh on his conscience “day and night and will do so for the rest of my days.”

“We did not fulfill our most important mission, giving a warning of war” he added, breaking down in tears at one point while he spoke about his family. “The ultimate responsibility for the failure of the intelligence division rest with me.”

WASHINGTON — U.S. Secretary of State Antony Blinken has discussed with Jordan’s deputy prime minister, Ayman Safadi, “the urgent need to finalize the cease-fire deal” between Israel and Hamas, the State Department said.

The call Wednesday came the same day Blinken returned from a series of stops across the Middle East to talk with Israeli officials and other negotiators Egypt and Qatar about urging the sides to accept a proposal meant to bridge gaps in cease-fire talks.

Blinken noted that the bridging proposal “addressed the remaining gaps in a manner that allows for swift implementation of the deal,” the State Department said.

But Egyptian officials have expressed skepticism, saying Hamas won’t agree to the proposal for a number of reasons — ones in addition to the long-held wariness over whether a deal would truly remove Israeli forces from Gaza and end the war.

Mediators are scheduled to meet Thursday and Friday in Cairo for more talks on the proposal, before submitting it officially to Hamas.

RAMALLAH, West Bank — The main Palestinian banking association says that all banks across Gaza have halted operations. It's the latest deterioration in living conditions for the war-ravaged enclave.

Bashar Yasin, general manager of the Association of Banks in Palestine, confirmed the closure Wednesday. The association represents banks across the occupied West Bank and Gaza Strip.

A number of banks had been semi-operational across Gaza before Wednesday, including a large Bank of Palestine branch in the central city of Deir al-Balah.

It was not immediately clear why the branch, one of the last places that Palestinians could withdraw cash, was closed.

The 10-month war has devastated Gaza’s already fragile economy, displacing most of the population, causing widespread damage and leaving the vast majority of Palestinian workers unemployed.

A cash crisis has worsened these problems, with displaced people having little or no access to their meager savings as prices for food and basic commodities have increased.

For months, hourslong queues had formed outside the few working branches and cash points, with limits on how much could be withdrawn.

— Jack Jeffery

JERUSALEM — Israel police say they arrested five ultra-Orthodox protesters at a demonstration in Jerusalem against mandatory enlistment.

Hundreds of ultra-Orthodox demonstrated outside of the Israeli military enlistment office in Jerusalem on Wednesday, blocking streets and preventing people who had received summons from the army from presenting themselves for enlistment.

Approximately 3,000 ultra-Orthodox have received summons in recent weeks after Israel’s Supreme Court unanimously ordered the government to begin drafting ultra-Orthodox Jewish men into the army.

The landmark ruling in June seeks to end a system that has allowed them to avoid enlistment into compulsory military service.

Under longstanding arrangements, ultra-Orthodox men have been exempt from the draft, which is compulsory for most Jewish men and women, who serve 2-3 years as well as reserve duty until around age 40.

Roughly 1.3 million ultra-Orthodox Jews make up about 13% of Israel’s population and oppose enlistment because they believe studying full-time in religious seminaries is their most important duty.

These exemptions have long been a source of anger among the secular public, a divide that has widened during the ten-month-old war, as the military has called up tens of thousands of reserve soldiers and says it needs all the manpower it can get. Over 600 soldiers have been killed since Hamas’ Oct. 7 attack.

ISTANBUL — U.S. Secretary of State Antony Blinken discussed developments in the Hamas-Israel cease-fire negotiations in a phone call with Turkish Foreign Minister Hakan Fidan, a spokesman for the ministry said Wednesday.

The conversation was held at the request of the U.S., Oncu Keceli said in a social media post. Turkey is a close supporter of Hamas and has condemned Israel’s campaign in Gaza as “genocide.”

Blinken and Fidan discussed “diplomatic efforts to prevent regional escalation and their shared commitment to creating conditions for a durable ceasefire, bringing the hostages home and ensuring vital humanitarian aid reaches those in need in Gaza,” according to a statement by the U.S. State Department.

JERUSALEM — Israel has ordered the evacuation of a residential area near the main hospital in central Gaza.

The military on Wednesday ordered people to leave an area in Deir al-Balah that is a few hundred meters (yards) away from the Al-Aqsa Martyrs Hospital, one of the last functioning medical centers in the territory. The military said it would soon act against militants in the area.

There was no evacuation order for the hospital itself, but during past evacuations people have fled from areas adjacent to the declared zones for fear the fighting could spread.

Israel’s offensive in Gaza, launched in retaliation for Hamas’ Oct. 7 attack, has displaced the vast majority of the territory’s 2.3 million residents, often multiple times.

The coastal strip, which is just 25 miles (40 kilometers) long by about 7 miles (11 kilometers) wide, has been completely sealed off by Israeli forces since May.

Around 84% of Gaza’s territory has been placed under evacuation orders by the Israeli military, according to the United Nations.

The war has destroyed much of Gaza’s health sector, and hospitals have struggled to function as they face waves of casualties from Israeli strikes. They have also been transformed into shelters, with thousands of people pitching tents in courtyards and parking lots.

Israeli forces have raided hospitals on several occasions since the start of the war, accusing Hamas and other militant groups of using them for military purposes, allegations denied by Gaza health officials.

BEIRUT — An Israeli airstrike on the Lebanese coastal city of Sidon on Wednesday killed the brother of a high-ranking official from the Palestinian faction Fatah’s military wing, state media and Palestinian officials in Lebanon said.

Khalil al-Maqdah, the brother of Fatah Gen. Mounir al-Maqdah, was killed in a strike on a vehicle, the state-run National News Agency reported.

Israeli officials have accused Mounir al-Maqdah of facilitating the smuggling of weapons into the West Bank.

Mounir al-Maqdah told the Beirut-based pan-Arab TV network Al Mayadeen on Wednesday that his brother had been a brigadier general in Fatah’s armed wing and vowed the group “will respond inside of Israel.”

Earlier this month, another Israeli drone strike hit an SUV on a main road in Sidon, killing a Hamas official identified as Samer al-Haj.

The Lebanese wings of Hamas and the allied Palestinian Islamic Jihad have launched occasional attacks on northern Israel from Lebanon over the past 10 months, and the Lebanese militant group Hezbollah has near-daily clashes with Israeli forces against the backdrop of Israel’s war against Hamas in Gaza. Fatah, a rival of Hamas, has not announced taking part in any of those operations to date.

JERUSALEM — Lebanon’s Hezbollah has launched more than 50 rockets, hitting a number of private homes in the Israeli-annexed Golan Heights.

First responders in Golan Heights said they treated a 30-year-old man who was moderately wounded with shrapnel injuries in Wednesday’s attack. One house was engulfed in flames, and firefighters said they prevented a bigger tragedy by stopping a gas leak.

Hezbollah said the attack was in response to an Israeli strike deep into Lebanon on Tuesday night that killed one and injured 19. On Tuesday, Hezbollah launched more than 200 projectiles toward Israel, after Israel targeted a Hezbollah weapons depot some 80 kilometers (50 miles) from the border, a significant increase in the daily skirmishes.

Israel and Hezbollah have traded near-daily strikes for more than 10 months against the backdrop of Israel’s war against Hezbollah’s ally, Hamas, in Gaza. The exchanges have killed more than 500 people in Lebanon — mostly militants but also including around 100 civilians and non-combatants — and 23 soldiers and 26 civilians in Israel.

Israel captured the Golan Heights from Syria in the 1967 Mideast war and later annexed it, saying it needs the strategic plateau for its security. The United States is the only country to recognize Israel’s annexation, while the rest of the international community considers the Golan to be occupied Syrian territory.

DUBAI, United Arab Emirates — A commercial ship traveling through the Red Sea came under repeated attack Wednesday, leaving the vessel “not under command” in an assault suspected to have been carried out by Yemen’s Houthi rebels, the British military said.

Details remained few about the attack, though it comes during the Houthis’ monthslong campaign targeting ships over the ongoing Israel-Hamas war in the Gaza Strip.

The attack saw men on small boats first open fire with small arms, the British military’s United Kingdom Maritime Trade Operations center said. The ship also was hit by three projectiles, it added.

“The vessel reports being not under command,” the UKMTO said, likely meaning it lost all power. “No casualties reported.”

The Houthis did not immediately claim the attack, though it can take them hours or even days before they acknowledge one of their assaults.

TEL AVIV, Israel — Defense Minister Yoav Gallant says Israel’s military is shifting its attention from Gaza to the border with Lebanon.

Touring northern Israel on Tuesday, Gallant said Israel has scaled back its activities in Gaza, where it has been fighting a war against Hamas for nearly a year, and turned its focus to Hezbollah militants in Lebanon.

“Our strongholds are moving from the south to the north, we are gradually changing, we still have a number of missions in the south,” Gallant told troops.

Hezbollah began striking Israel almost immediately after Hamas’ Oct. 7 attack. The sides have been engaged in almost daily fighting since then, raising fears of a broader regionwide war. Those fears have grown as Hezbollah has vowed retaliation for an Israeli strike in Beirut last month that killed a top Hezbollah commander.

Hezbollah launched more than 120 projectiles toward northern Israel on Tuesday, causing damage to a home and sparking a number of fires. Israel said it was striking the source of the launches.

More than 500 people have been killed in Lebanon, including at least 100 civilians. In Israel, 23 soldiers and 26 civilians have been killed.

Rimon Buchshtab, center, mourns during the funeral of her husband Yagev Buchshtab at a cemetery of the kibbutz Nirim, southern Israel, Wednesday, Aug. 21, 2024. Buchshtab's body was one the six bodies of hostages, taken in Hamas' Oct. 7 attack, recovered by Israel's military during an operation in the Gaza Strip. (AP Photo/Leo Correa)

Rimon Buchshtab mourns during the funeral of her husband Yagev Buchshtab at a cemetery of the Kibbutz Nirim, southern Israel, Wednesday, Aug. 21, 2024. Buchshtab's body was one of six bodies of hostages, taken in Hamas' Oct. 7 attack, recovered by Israel's military during an operation in the Gaza Strip. (AP Photo/Leo Correa)

Mourners attend the funeral of Avraham Munder, who was killed in Hamas captivity in the Gaza Strip and recovered by the Israeli military in Gaza, at Kibbutz Nir Oz, southern Israel, Wednesday, Aug. 21, 2024. On Tuesday, the Israeli military said its forces recovered six bodies of hostages kidnapped on Oct. 7 in an overnight operation in southern Gaza. (AP Photo/Ohad Zwigenberg)

Widow Ruti Munder stands near the grave of her husband Avraham Munder, who was killed in Hamas captivity in the Gaza Strip and recovered by the Israeli military in Gaza, at Kibbutz Nir Oz, southern Israel, Wednesday, Aug. 21, 2024. Their son, Roee Munder, who was killed on Oct. 7, 2023, was reburied at the Kibbutz. (AP Photo/Ohad Zwigenberg)

Palestinian mourners carry the coffin of Khalil al-Maqdah, the brother of Fatah Gen. Mounir al-Maqdah, who was killed by an Israeli strike on a vehicle in the southern port city of Sidon, during his funeral procession at the Palestinian refugee camp of Ein el-Hilweh, south Lebanon, Wednesday, Aug. 21, 2024. (AP Photo/Mohammed Zaatari)

Palestinian Fatah fighters from Al-Aqsa Martyrs' Brigades, stand guard during the funeral procession of Khalil al-Maqdah, the brother of Fatah Gen. Mounir al-Maqdah, who was killed by an Israeli strike on a vehicle in the southern port city of Sidon, at the Palestinian refugee camp of Ein el-Hilweh, south Lebanon, Wednesday, Aug. 21, 2024. (AP Photo/Mohammed Zaatari)

Mourners chant slogans as they carry the coffin of Ali Ahmad Mousawi, who was killed early Wednesday by an Israeli strike, during his funeral procession in Nabi Sheet village, in Lebanon's eastern Bekaa Valley, Wednesday, Aug. 21, 2024. (AP Photo/Bilal Hussein)

Israeli soldiers move on the top of a tank near the Israeli-Gaza border, as seen from southern Israel, Wednesday, Aug. 21, 2024. (AP Photo/Leo Correa)

Rimon Buchshtab mourns during the funeral of her husband Yagev Buchshtab at a cemetery of the kibbutz Nirim, southern Israel, Wednesday, Aug. 21, 2024. Buchshtab's body was one the six bodies of hostages, taken in Hamas' Oct. 7 attack, recovered by Israel's military during an operation in the Gaza Strip. (AP Photo/Leo Correa)

Rimon Buchshtab, center, mourns during the funeral of her husband Yagev Buchshtab at a cemetery of the kibbutz Nirim, southern Israel, Wednesday, Aug. 21, 2024. Buchshtab's body was one the six bodies of hostages, taken in Hamas' Oct. 7 attack, recovered by Israel's military during an operation in the Gaza Strip. (AP Photo/Leo Correa)

An Israeli tank is seen near the Israeli-Gaza border, with destroyed buildings in the back in the Gaza Strip, as seen from southern Israel, Wednesday, Aug. 21, 2024. (AP Photo/Leo Correa)

Mourners chant slogans as they carry the coffin of Ali Ahmad Mousawi, who was killed early Wednesday by an Israeli strike, during his funeral procession in Nabi Sheet village, in Lebanon's eastern Bekaa Valley, Wednesday, Aug. 21, 2024. (AP Photo/Bilal Hussein)

A woman throws rose petals as mourners carry the coffin of Ali Ahmad Mousawi, who was killed early Wednesday by an Israeli strike, during his funeral procession in Nabi Sheet village, in Lebanon's eastern Bekaa Valley, Wednesday, Aug. 21, 2024. (AP Photo/Bilal Hussein)

Mourners carry the coffin of Ali Ahmad Mousawi, who was killed early Wednesday by an Israeli strike, during his funeral procession in Nabi Sheet village, in Lebanon's eastern Bekaa Valley, Wednesday, Aug. 21, 2024. (AP Photo/Bilal Hussein)

A man works next to a destroyed home after rockets struck in Katzrin, in the Israeli-annexed Golan Heights, Wednesday, Aug. 21, 2024. Lebanon's Hezbollah has launched more than 50 rockets, hitting a number of private homes in the area.(AP Photo/Ariel Schalit)

A man works next to a destroyed home after rockets struck in Katzrin, in the Israeli-annexed Golan Heights, Wednesday, Aug. 21, 2024. Lebanon's Hezbollah has launched more than 50 rockets, hitting a number of private homes in the area.(AP Photo/Ariel Schalit)

Household items lie destroyed at a home after rockets struck in Katzrin, in the the Israeli-annexed Golan Heights, Wednesday, Aug. 21, 2024. Lebanon's Hezbollah has launched more than 50 rockets, hitting a number of private homes in the area.(AP Photo/Ariel Schalit)

An Israeli soldier examines a home after rockets struck in Katzrin, in the the Israeli-annexed Golan Heights, Wednesday, Aug. 21, 2024. Lebanon's Hezbollah has launched more than 50 rockets, hitting a number of private homes in the area.(AP Photo/Ariel Schalit)

A child stands in the rubble from rocket strikes in Katzrin, in the the Israeli-annexed Golan Heights, Wednesday, Aug. 21, 2024. Lebanon's Hezbollah has launched more than 50 rockets, hitting a number of private homes in the area.(AP Photo/Ariel Schalit)

A home destroyed by rockets in Katzrin, in the the Israeli-annexed Golan Heights, Wednesday, Aug. 21, 2024. Lebanon's Hezbollah has launched more than 50 rockets, hitting a number of private homes in the area.(AP Photo/Ariel Schalit)

A Lebanese army soldier passes in front a car that was hit by an Israeli strike in the southern port city of Sidon, Lebanon, Wednesday, Aug. 21, 2024. (AP Photo/Mohammad Zaatari)

Lebanese army soldiers gather around a car that was hit by an Israeli strike in the southern port city of Sidon, Lebanon, Wednesday, Aug. 21, 2024. (AP Photo/Mohammad Zaatari)

Workers use a crane to remove a car that was hit by an Israeli strike in the southern port city of Sidon, Lebanon, Wednesday, Aug. 21, 2024. (AP Photo/Mohammed Zaatari)

Civil Defense workers look for human remains inside a car that was hit by an Israeli strike in the southern port city of Sidon, Lebanon, Wednesday, Aug. 21, 2024. (AP Photo/Mohammed Zaatari)

Displaced Palestinians walk past tents pitched on the beach, west of Deir al-Balah, Gaza Strip, Tuesday, Aug. 20, 2024. (AP Photo/Abdel Kareem Hana)

A protester holds a poster showing Shiri Bibas and her child, Kfir, hostages taken with their family by Hamas militants to the Gaza Strip, to honor the memories of six men whose bodies were returned and to call for a deal to release the remaining captives, in Tel Aviv, Tuesday, Aug. 20, 2024. (AP Photo/Ariel Schalit)

A demonstrator holds a banner with a portrait of the slain hostage Yoram Metzger, who was taken by Hamas militants to the Gaza Strip in Oct. 7 attack, during a protest, in Jerusalem, Tuesday, Aug. 20, 2024. People gather to honor the memories of six men whose bodies were returned and to call for a deal to release the remaining captives. (AP Photo/Leo Correa)

People hold portraits of the hostages taken in Hamas’ Oct. 7 attack, in Jerusalem, Tuesday, Aug. 20, 2024. People gather to honor the memories of six men whose bodies were returned and to call for a deal to release the remaining captives. (AP Photo/Leo Correa)

Israeli police officers move a demonstrator blocking a street during a protest, in Jerusalem, Tuesday, Aug. 20, 2024. People gather to honor the memories of six men whose bodies were returned and to call for a deal to release the remaining captives. (AP Photo/Leo Correa)

Protesters stand with large cutout photos of slain hostages and other hostages with relatives of hostages taken by Hamas militants to the Gaza Strip, to honor the memories of six men whose bodies were returned and to call for a deal to release the remaining captives, in Tel Aviv, Israel, Tuesday, Aug. 20, 2024. (AP Photo/Ariel Schalit)

Tents are crammed together as displaced Palestinians camp on the beach, west of Deir al-Balah, Gaza Strip, Tuesday, Aug. 20, 2024. (AP Photo/Abdel Kareem Hana)

Tents are crammed together as displaced Palestinians camp on the beach, west of Deir al-Balah, Gaza Strip, Tuesday, Aug. 20, 2024. (AP Photo/Abdel Kareem Hana)

Tents are crammed together as displaced Palestinians camp on the beach, west of Deir al-Balah, Gaza Strip, Tuesday, Aug. 20, 2024. (AP Photo/Abdel Kareem Hana)

Displaced Palestinians camp on the beach, west of Deir al-Balah, Gaza Strip, Tuesday, Aug. 20, 2024. (AP Photo/Abdel Kareem Hana)

FRANKFURT, Germany (AP) — With inflation subsiding, the European Central Bank cut interest rates again on Thursday to prop up tepid growth with lower borrowing costs for companies and home buyers. The U.S. Federal Reserve likely won’t be far behind in joining the rate-cutting process.

The bank’s rate-setting council lowered the deposit rate from 3.75% to 3.5% at a meeting at its skyscraper headquarters in Frankfurt.

It was the second rate cut as the bank starts to withdraw some of the swift rate increases it imposed to snuff out a burst of double-digit inflation that broke out after Russia cut off most natural gas supplies over its invasion of Ukraine.

But experts don't expect a rapid series of rate cuts from either the ECB or the Fed central bank to anywhere near the rock-bottom levels from before the 2020 outbreak of the COVID-19 pandemic. They say the ECB will tiptoe, rather than slash, and might cut rates only one more time this year. Inflation's down with the help of lower oil prices.

Inflation in the 20 countries that use the euro currency fell to 2.2% in August, not far from the ECB’s 2% target, down from 10.6% at its peak in October, 2022.

At her post-decision news conference, bank President Christine Lagarde said recent data had confirmed “our confidence that we are heading towards our target in a timely manner.”

But she steered clear of any guidance on further cuts. She said the bank would make rate decisions on a meeting by meeting basis depending on incoming information about the economy and was "not pre-committing to a particular rate path.”

Policy makers must keep an eye on simmering inflation among services companies and rising wages as workers push to make up for purchasing power lost to the outburst of inflation that followed the end of the pandemic.

The ECB cut once in June and then hit pause in July before going on summer break in August. The rate-setting council led by President Christine Lagarde has to juggle concerns about a disappointing outlook for growth against - which argues for cuts - against the need to make sure inflation is going to reach the bank’s 2% target and stay there - which would support keeping rates higher for a bit longer.

Consumer prices spiked after Russian cut off most natural gas shipments to Europe over its February, 2022 invasion of Ukraine, sending utility bills higher. The rebound from the pandemic also led to bottlenecks in supplies of parts and raw materials, further boosting inflation that then spread more broadly to services, a broad category that includes medical care, personal services such as haircuts, restaurants, hotels and entertainment.

The ECB and the Fed responded with swift rate rises, the ECB bringing its benchmark rate to a record high of 4%, since cut in June to 3.75%.

The central bank’s benchmark rate strongly influences what private-sector banks pay to borrow - and through that rates across the rest of the economy. Higher rates cool inflation by making it more expensive to borrow and buy things, holding back price rises. But high rates can slow growth, and that worry is coming into focus.

Higher rates in Europe and the U.S. have meant increased mortgage costs for home buyers, and higher payments for people who run credit card balances or buy cars on credit. But they have been a boon to savers and retirees who like interest income and are getting visible returns on their bank holdings or money market accounts after years of zero returns.

The Fed is also expected to make a first cut in its benchmark rate at its Sept. 17-18 meeting from a 23-year high of 5:25%-5.5%. Consumer prices rose 2.5% in August from a year earlier, down from 2.9% in July. It was the fifth straight annual drop in inflation. Core inflation excluding volatile fuel and food - which can be a better guide - was higher at 3.2%.

“The long-awaited Fed easing cycle is upon us,” said Brian Coulton, chief economist at Fitch Ratings, but the Fed rate-setters “will be cautious after the inflation challenges of the past few years. The pace of rate cuts will be gentle and monetary easing won’t do much to boost growth next year.”

Europe growth has been sluggish, at 0.3% in the second quarter of this year and a roughly 1.0% annual rate based on performance in the first half. That follows more than a year of near-zero stagnation. Hopes for a more robust pickup have been dampened by recent indicators of business and consumer sentiment, and by a stream of bad news from the eurozone’s biggest economy, Germany.

Germany contracted by 0.1% in the second quarter and its outlook remains gloomy amid a global slowdown in manufacturing. On top of that come long-term factors such as an ageing population, shortage of skilled workers, lagging implementation of digital technology, and excessive bureaucracy that slows down business creation and expansion. Major employer Volkswagen has dropped its no-layoffs pledge that was to run through 2029 as it seeks to cut costs, and has warned it may need to close one or more factories in Germany amid weaker demand for its new electric vehicles in Europe and in China.

FILE - A light installation is projected onto the building of the European Central Bank during a rehearsal in Frankfurt, Germany, Thursday, Dec. 30, 2021. (Photo/Michael Probst, File)