ECB Hikes Interest Rate to Combat Energy-Fueled Inflation

The European Central Bank has raised its benchmark interest rate by a quarter percentage point to 2.50% in an effort to cool inflation fueled by high oil prices.

The decision was made at a meeting held in Berlin, away from the bank's Frankfurt headquarters, and was supported by a stronger-than-expected economy that suggests businesses can weather higher borrowing costs.

European Central Bank President Christine Lagarde said the conflict in the Middle East is continuing to generate inflation pressures, and inflation is set to remain well above target for an extended period.

The bank's move was described by Carsten Brzeski, global head of macro at ING bank, as 'a hike to stay ahead of the curve' and a demonstration of the ECB's high level of vigilance in attempting to prevent higher energy prices from feeding through to the broader economy.