The European Central Bank (ECB) raised borrowing rates by 0.25 percent on Thursday (11 June) because energy related inflation has started to spill through the wider economy.
Inflation has risen steadily since the US-Israeli war began in February and oil and overseas gas supplies were disrupted, pushing up prices.
“We have endured a major energy shock, far longer than anything geopolitical experts expected and we are seeing a broadening effect throughout the economy,” said ECB president Christine Lagarde on Thursday.
Its main deposit rate is now at 2.25 percent.
The bank projects inflation this year to average three percent, or 2.5 percent if energy and food prices are stripped out.
