ECB Hikes Interest Rates to Quell Energy-Driven Inflation in Eurozone
The European Central Bank (ECB) has raised interest rates by a quarter point to cool inflation in the eurozone, which is being fueled by high energy prices due to the Iran war. The decision was made at a meeting held in Berlin, away from the bank's headquarters in Frankfurt. This marks the first rate hike since June 11 and brings the benchmark rate to 2.50%.
Bank President Christine Lagarde said that the conflict in the Middle East continues to generate inflation pressures, and inflation is set to remain 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 added.
The ECB's move was welcomed by Carsten Brzeski, global head of macro at ING bank, who said it 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.