ECB Leaves Door Open for Further Rate Hikes Amid Energy Price Fears

European Central Bank (ECB) policymakers have left open the possibility of further interest rate hikes to combat rising energy prices, fueled by the ongoing war. Bundesbank President Joachim Nagel acknowledged that the ECB might need to raise rates to a level that mildly curbs the economy if oil and gas prices continue to rise.

The ECB increased its key rate from 2.25% to 2.50% on Thursday, bringing it to the upper end of its estimated neutral range. Money markets are now pricing in at least three more rate hikes over the next year.

Ülo Kaasik, Estonia's central bank governor, said that expectations of further rate hikes were 'understandable' given the recent increase in fuel prices and the risk that food will become more expensive as well. Slovenian central bank governor Primož Dolenc also warned about rising energy costs.