ECB Hikes Rates to Combat Inflation Fuelled by Iran War

The European Central Bank (ECB) raised interest rates for the second time this year on Thursday, aiming to combat inflation driven by higher energy costs from the Iran war.

The euro weakened 0.3% to around $1.159 following the decision, while euro zone government bond yields edged up to fresh multi-year highs. The oil price surged more than 4% to $105.3 a barrel, adding to investor concern about sustained inflation.

MARK WALL, Chief European Economist at Deutsche Bank, London, noted that 'the inflation risks may be rising and a further hike in December may be more likely than not.' However, he also emphasized the need for caution due to the economy's resilience over the last six months.