ECB Hikes Rates Again as Iran War Fuels Inflation Fears

The European Central Bank (ECB) raised interest rates for the second time this year on September 10, in an effort to combat inflation driven by higher energy costs resulting from the Iran war.

The move was widely anticipated and saw the euro weaken 0.3% to around $1.159, while euro zone government bond yields edged up to fresh multi-year highs.

According to experts, the ECB's decision is a sign that more policy tightening may be required in the coming meetings, with core inflation projected at 2.3% in 2028, higher than the previous projection of 2.2%.

However, some economists caution that the ECB needs to tread carefully, as rapidly rising gas prices will eventually hurt growth and weigh on eurozone economy, particularly in 2027.