ECB Hikes Rates Again Amid Energy-Driven Inflation Fears

The European Central Bank (ECB) raised interest rates for the second time this year to quell an energy-driven rise in inflation, which has been triggered by the Iran war. The policy rate was increased to 2.50 percent from 2.25 percent.

The ECB acknowledged that even with this hike, inflation is expected to stay above its 2 percent goal through to 2028, due to resilient economic activity and higher fuel costs.

Market participants have raised their bets on further hikes, pricing in an additional 60 basis points of increases by the April 2027 meeting, up from around 51 basis points beforehand.

ECB President Christine Lagarde stressed that the bank does not pre-commit to any future moves, and that markets do what they have to do while the ECB focuses on providing price stability.