BERLIN, Germany: The European Central Bank raised interest rates for the second time this year on September 10 as rising energy costs increased inflation pressures across the euro zone, while warnings that price growth could persist strengthened expectations of further tightening.

Attacks by the U.S. and Iran on military, shipping and energy assets across the Middle East since late August have pushed oil prices back above US$100 a barrel, raising concerns about higher prices in the fuel-importing euro zone.

ECB President Christine Lagarde described the rate increase as a "no-brainer" and warned that inflation's return to the central bank's two percent target, currently expected at the end of 2027, could be delayed further.

"The outlook remains highly uncertain, with risks to the upside for inflation and to the downside for economic growth," Lagarde told a press conference. "We believe inflation will be longer lasting than we had anticipated," she said.

Further tightening is now considered likely and could be discussed as soon as October 29, according to sources close to the discussions.

The ECB raised its inflation projections only slightly, but the forecasts were finalized before the latest rise in energy prices. Some economists therefore consider the newly released figures already outdated.

Oil prices are now in line with the ECB's "adverse" scenario, while natural gas prices are even higher than the level envisaged under that scenario and are approaching its "severe" scenario.

"Given the recent jump in energy futures prices, unchanged staff forecasts for core inflation for 2026 and 2027 are untenable," Arne Petimezas, director of research at Dutch broker AFS, said. "Expect both to be raised and paired with another quarter point hike in December."

Investors now expect more than three rate increases over the next 12 months, compared with between two and three before the meeting on September 10.

Lagarde, however, said further increases were not certain and that she could not anticipate the ECB's next move.

"We have not debated at all any kind of future path," Lagarde said. "Markets do what they have to do and we do what we have to do, which is to provide price stability."

Economists polled before the decision had expected the increase on September 10 to be the ECB's last for now, although expectations had already begun to change.

"In light of this hawkish tone, we are revising our forecast for December and now expect another 25-basis-point rate hike," Commerzbank economist Jörg Krämer said.

Lagarde also raised growth forecasts for this year and next, saying the 21-country euro-zone economy was proving more resilient than feared. Stronger growth could add to inflation pressures and support the case for further rate increases.

"The ECB may need to move into restrictive territory and cannot rule out further rate hikes at this stage," Sylvain Broyer at S&P Global Ratings said. "The inflation outlook has worsened over the summer. Supply shocks are not only multiplying, but it is increasingly likely that demand is also adding to inflation."

However, the labor market remains relatively soft, underlying inflation fell last month and wage indicators remain benign, suggesting no immediate danger of a difficult-to-break wage-price spiral.

Some economists therefore expect the ECB to continue raising rates at quarterly intervals.

"We maintain our baseline of two further 25 basis point rate hikes at quarterly intervals, with the next one in December and the second in March 2027," Nordea economists Jan von Gerich and Tuuli Koivu said.