ECB Hikes Interest Rates Again Amid Ongoing Energy Shock

The European Central Bank (ECB) has raised interest rates for the second time this year in response to the ongoing energy shock triggered by the Middle East conflict. The central bank lifted its benchmark rate a quarter percentage point to 2.5 percent, its highest level since March last year.

This decision was widely anticipated and follows the ECB's first increase in June, which was also a result of the energy shock caused by the US war on Iran. With renewed energy price rises expected to push eurozone inflation even higher, President Christine Lagarde described the unanimous decision as a 'no-brainer'.

Lagarde emphasized 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. Despite this, the ECB has raised its growth forecasts for this year to 0.9 percent and for next year to 1.4 percent, indicating that the eurozone economy has withstood the energy shock better than feared.