The European Central Bank has raised its three key interest rates by 25 basis points, citing growing inflation risks linked to the war in the Middle East and warning that the conflict could weigh on economic growth across the euro area.
Announcing the decision on Thursday, the ECB’s Governing Council said it remained focused on bringing inflation back to its 2 percent target over the medium term, even as geopolitical tensions create fresh uncertainty for policymakers.
Read also: Ten banks that control more than $44 tn in assets
“The war in the Middle East is generating inflation pressures, and the decision to raise rates is robust across a range of scenarios mapping out how the shock might evolve and affect the medium term outlook for the euro area,” the central bank said in its policy statement.
The move marks a significant response to mounting concerns that higher energy prices triggered by the conflict could spill over into wider parts of the economy, keeping inflation elevated for longer than previously expected.
