ECB Signals Further Rate Hikes Amid Energy-Price Concerns

The European Central Bank (ECB) has signaled that it may raise interest rates further as the energy shock from the Iran war continues to threaten inflation targets. Despite a more resilient euro-zone economy, higher oil and energy costs have complicated the inflation outlook.

ECB policymakers are keeping an eye on oil, natural gas, and electricity costs, assessing whether these rising prices are feeding into wages and broader prices. The bank's deposit rate has been raised to 2.5%, and markets expect three more hikes by October 2027.

Governing Council member Peter Kazimir sees inflation risks as 'clearly tilted to the upside,' stating that the ECB is prepared to tighten policy again if incoming evidence requires it. Executive Board member Isabel Schnabel highlighted recent energy-price developments as a growing concern for the central bank.