ECB Raises Deposit Rate Amid Rising Energy Prices and Inflation Concerns

The European Central Bank (ECB) has raised its key deposit rate by 25 basis points to 2.5% from 2.25%, a move that was widely anticipated by financial markets amid rising energy prices and higher inflation.

The decision comes as uncertainty surrounding the U.S.-Iran conflict and its impact on energy markets clouds the outlook for the ECB's longer-term monetary policy, with investors closely watching comments from policymakers for clues about the bank's next steps.

ECB President Christine Lagarde warned that the conflict in the Middle East, along with developments in Russia's war against Ukraine, could keep headline inflation 'well above target' for an extended period, which is 2%.