Berlin: The European Central Bank raised borrowing costs and warned that inflation could remain high for an extended period. Energy markets and geopolitical tensions are still major concerns.

According to Deutsche Welle, the European Central Bank (ECB) raised interest rates on Thursday, hoping to curb rising inflation driven by higher energy costs stemming from the war between the US and Iran. This is the second increase that the ECB has had to implement this year. Rising oil and natural gas prices pushed inflation above 3% in the 21-country eurozone, surpassing the previous target of 2%.

"The outlook remains highly uncertain, with risks to the upside of inflation and to the downside of economic growth," the ECB said in a statement after its annual meeting, held this year in Berlin.

The ECB also announced its economic growth projection for 2026. The study reveals slight growth of 0.9% compared to 0.8% in June, and inflation is now expected to average 3.0% this year and 2.5% in 2027.

Without a clear resolution to the US-Israel conflict with Iran, which began in late February, energy costs continue to rise, suggesting persistent inflation. There is also growing concern about gas storage levels, which remain below historical norms as the winter heating season approaches.