The ECB on Thursday, alongside a rate decision, raised its inflation forecasts
and trimmed some growth projections, citing an energy shock from the Iran war
that is spilling across the 21-member currency union. Euro-area inflation rose
above 3% last month and further consumer-price pressure is likely as energy
costs climb. With inflation already evident and risks of second-round effects
mounting, the ECB hiked rates; market participants price roughly two more hikes
over the next year. Higher prices and borrowing costs are eroding household
purchasing power and corporate margins, weighing on growth in an economy that
was only marginally expanding before the conflict.
