The European Central Bank (ECB) held its benchmark interest rate unchanged at 2.5%, as expected, while warning that higher borrowing costs could hold back economic growth.
"Financing conditions have tightened since the Governing Council's last meeting, which is likely to weigh on inflation and growth," the central bank for the 21-nation eurozone said in a statement.
Shortly before announcing its interest rate decision, the ECB said its president, Christine Lagarde, would step down on Feb. 7, 2027, nearly nine months before her eight-year term was due to end in late October.
The sharp rise in energy prices following the outbreak of war in Iran has pushed up consumer prices across the eurozone, strengthening the case for what would have been the ECB's third interest rate increase this year.
Eurozone inflation climbed to 3.8% in September, its highest level in three years, driven largely by rising fuel prices.
The rate is now well above the ECB's medium-term inflation target of 2%.
However, higher borrowing costs can also discourage investment and weigh on economic growth.
