European Central Bank Raises Rates in Bid to Quell Inflation

The European Central Bank raised interest rates on Thursday to the highest level in more than a year, as officials try to quell inflation driven by the war in the Middle East.

Policymakers at the bank, which sets rates for the 21 countries that use the euro, lifted their key rate a quarter point, to 2.5 percent. It was the second rate increase since the United States and Israel attacked Iran in February, starting a war that has sent global energy prices sharply higher.

This week the price of Brent crude, the international benchmark, climbed above $100 a barrel, and European natural gas prices are more than double what they were before the war.

The bank also said that inflation would be moderately higher than it previously expected next year but that economic growth would be stronger than their earlier forecast because of better-than-expected economic resilience.

“The outlook remains highly uncertain,” the bank said in a statement on Thursday, adding that the rate-setting council “remains well positioned to navigate the uncertainty caused by the conflict.”

The world’s major central banks have come under pressure to respond to rising inflation with higher interest rates amid jitters in the bond market, where investors are alert to rising debt and widening deficits by some of the world’s richest nations. In recent weeks, government bond yields have risen to levels not seen in more than a decade.