ECB hikes interest rates 25 bps to 2.5% as regional tension fuels inflation risk

The European Central Bank Thursday raised interest rates by 25 basis points to 2.5%, indicating that inflation will remain well above its 2% target for an extended period.

The bank explained that tension in the region increases uncertainty, warning of upside risks to inflation and downside risks to economic growth.

“The conflict in the Middle East continues to generate inflation pressures, and inflation is set to remain well above target for an extended period,” the ECB said in a statement, adding that its decision underscores its commitment to ensuring that inflation stabilises at 2% in the medium term.