ECB Raises Interest Rates as Energy Prices Drive Inflation

The European Central Bank (ECB) raised interest rates by 25 basis points to 2.50% on Thursday, marking the second rate hike this year.

The decision was made in response to soaring energy prices that have driven Eurozone headline inflation up to 3.3%, with energy components surging 14.3% in August.

ECB President Christine Lagarde and policymakers acted decisively to prevent second-round effects from embedding into wage demands and service pricing, as swap markets are already pricing in another rate hike before year-end.

The move brings Eurozone borrowing costs to their highest level since April 2025, with the Governing Council signaling that they cannot risk allowing energy-driven price pressures to entrench wage effects.