ECB Hikes Rates Amid Energy Shock, Paves Way for Further Tightening

The European Central Bank (ECB) raised interest rates for the second time this year, increasing its benchmark rate to 2.5 percent, its highest level since March last year.

This move comes as renewed Middle East fighting fuels fears of higher inflation, and ECB President Christine Lagarde stated that 'the conflict in the Middle East continues to generate inflation pressures, and inflation is set to remain well above target for an extended period.'

The ECB hiked its growth forecasts for this year to 0.9 percent and for next year to 1.4 percent, indicating that the eurozone economy has withstood the energy shock better than expected.