ECB Hikes Rates Again to Combat Middle East Energy Shock

The European Central Bank (ECB) has raised interest rates for the second time this year in an effort to combat rising energy costs and inflation. The benchmark rate was increased by a quarter percentage point, reaching its highest level since March last year at 2.5%. This move comes as global energy prices surge due to renewed tensions in the Middle East, with Brent international oil benchmark climbing back above $100 a barrel.

The ECB's decision is aimed at slowing inflation, which hit 3.3% in August, exceeding its target of 2%. However, some economists argue that rate hikes may not be enough to address the root cause of the current energy shortage and price increases.

Sylvain Broyer, chief economist for Europe, Middle East and Africa at S&P, stated that 'the inflation outlook has worsened over the summer' and that 'supply shocks are not only multiplying, but it is increasingly likely that demand is also adding to inflation.'