ECB Hikes Rates Amid Rising Energy Costs

The European Central Bank (ECB) has raised its key interest rate by 0.25% to 2.5%, attempting to combat inflation driven by rising energy costs.

The decision was made in response to Brent crude prices climbing back above $100 a barrel due to the conflict between the US and Iran, disrupting traffic through the Strait of Hormuz.

The ECB's move is aimed at preventing an imported price shock from becoming a domestic one, with core inflation edging down to 2.4% in August and services inflation easing to 3.0%.

However, experts warn that further interest rate increases could squeeze indebted households, weaken housing markets, and make business investment more expensive.