ECB Hikes Interest Rate to 2.5% Amid Fears of Prolonged Inflation

The European Central Bank (ECB) increased its main interest rate to 2.5% on Thursday, marking the highest level since March last year.

This move was widely anticipated by investors, but the language surrounding it has sparked concerns about inflation.

According to Christine Lagarde, ECB president, 'inflation will be longer lasting than we had anticipated.'

The central bank now expects inflation to average 3% across the year, surpassing its target of 2%. The increase in interest rates is expected to ease this pressure by the end of 2027.

The renewed conflict between the US and Iran has driven up energy costs, contributing to the rise in inflation. Brent crude pushed past $105 a barrel before easing to about $104.5, while the Dutch wholesale price for gas reached €82.56/MWh.