ECB raises rates due to Iran war

The European Union — European Central Bank>>> (ECB) has become the first major central bank to raise interest rates in response to the inflation fueled by the Iran>>> war. The ECB increased its benchmark rate to 2.25% from 2% as oil prices surged due to Iran>>>'s closure of the Strait of Hormuz>>>. This action aims to combat consumer price inflation, which reached 3.2% in May in Eurozone countries, exceeding the ECB's 2% target. Other central banks, including those in Australia>>> and the Philippines>>>, have also raised rates. The U.S. United States — Federal Reserve>>>, under new Chair Kevin Warsh>>>, is expected to keep rates unchanged next week but may signal a future hike as inflation jumps to a three-year high. ECB President Christine Lagarde>>> stated that future decisions would be data-dependent, acknowledging the uncertainty caused by the war and elevated energy prices. Analysts suggest the ECB's hike might be a 'one and done' affair, given mediocre economic growth and consumers' reluctance to absorb higher prices.