ECB Hikes Rates to 2.5% Amid Energy Price Crisis

The European Central Bank (ECB) has raised interest rates to 2.5 per cent, as energy prices continue to drive up bond yields.

The move comes amid a sharp rise in government borrowing costs, with Germany's 10-year yield reaching its highest level since 2011 and France's 30-year borrowing cost moving to a level last seen in 2003.

The ECB's new projections put headline inflation at 3 per cent in 2026, 2.5 per cent in 2027, and 2.1 per cent in 2028, with growth projected at 0.9 per cent this year, 1.4 per cent next year, and 1.5 per cent in 2028.

The decision was accompanied by updated projections and a detailed explanation from Christine Lagarde, but the bank's governing council declined to pre-commit to a further rate path, citing highly uncertain economic conditions.