ECB raises benchmark rate to 2.25% amid energy price surge

The European Central Bank is poised to raise interest rates for the first time in nearly three years on Thursday, June 11, as it confronts persistent inflation driven by soaring energy costs linked to the conflict in Iran. The widely anticipated move would increase the benchmark deposit rate by a quarter point to 2.25 percent.

Economists overwhelmingly expect the hike, which would mark a significant policy shift for the central bank after a prolonged period of holding rates steady. The decision comes as inflation in the euro zone, measured at 3.2 percent in April, remains stubbornly above the ECB's 2 percent target. Energy prices surged 10.9 percent year-over-year that month, while core inflation, which excludes volatile food and energy costs, also rose to 2.5 percent, raising concerns that price pressures are broadening.

Officials have signaled that the conflict in the Middle East, which has disrupted global liquefied natural gas flows and kept European energy prices elevated, represents a sustained shock that can no longer be ignored. The situation is compounded by lower-than-usual natural gas storage levels within the European Union. In supporting the case for action, the ECB...