The European Central Bank kept interest rates unchanged at 2.00%, but its message was cautionary as inflation rose and energy risks intensified. Eurozone inflation jumped to 3.0% in April, from 2.6% in March, its highest level since September 2023, driven by higher energy prices linked to the Middle East conflict. Growth also weakened, with eurozone GDP rising just 0.1% in the first quarter, down from 0.2% previously. Christine Lagarde said policymakers discussed a rate rise 'at length' and would revisit the issue in June. This means borrowing costs may stay higher for longer, and further rate hikes are possible if energy costs feed into wider prices. Markets still expected three quarter-point increases this year, though confidence in a third hike fell to about 75% after the decision.