ECB Hikes Rates Amid Energy Shock, Leaves Door Open for Further Increases

The European Central Bank (ECB) raised interest rates for the second time this year to combat inflation and energy shocks. The benchmark rate was increased by a quarter percentage point to 2.5 percent, its highest level since March last year.

ECB President Christine Lagarde attributed the decision to renewed Middle East fighting, which has driven up global energy prices. Brent international oil prices have climbed back above $100 a barrel this week, while natural gas prices in Europe reached their highest level in over three years.

Lagarde emphasized that inflation is expected to remain well above target for an extended period and that the eurozone economy has shown resilience in withstanding the energy shock. However, analysts note that Lagarde's tone was 'hawkish', suggesting further rate hikes may be on the horizon.