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FRANKFURT, Germany (AP) — The European Central Bank on Thursday became the first major central bank to raise interest rates in response to the Iran war as policymakers around the world including new U.S. Federal Reserve Chair Kevin Warsh wrestle with how to confront the inflation fed by sharply higher oil prices.

The ECB’s rate-setting council raised its benchmark rate to 2.25% from 2%, where it had been for a year. The move comes ahead of rate-setting meetings next week at the Fed, the Bank of Japan, and the Bank of England.

Oil prices have risen sharply due to Iran choking off the flow of crude oil through the Strait of Hormuz, the sea passage for a fifth of the world’s oil and fuel products during normal times. Raising rates aims to dampen the consumer price inflation fed by higher costs for products made from crude such as gasoline, diesel fuel, cooking gas and heating oil.

International benchmark Bent crude was trading at around $93 per barrel on Thursday, up from around $73 on the eve of the war. That has helped push inflation to 3.2% in May in the 21 countries that use the euro currency, above the ECB’s target of 2%.

But ECB policymakers must also consider the impact of higher borrowing costs on an economy showing only mediocre growth. That has led analysts to think Thursday’s hike will be a one and done affair, aimed mainly at signaling to financial markets that the bank is determined not to get behind the curve if inflation spirals higher.

The bank’s future decisions depend to a great extent on how long energy prices remain elevated and how high they go, ECB President Christine Lagarde said at a post-decision news conference. She said the bank was “well positioned to navigate the uncertainty caused by the war” and would “closely monitor the situation and follow a data-dependent and meeting-by-meeting approach.” She said the bank was “not pre-committing to a particular rate path.”

She said oil prices were expected to “lift inflation further over the summer” and that inflation was expected to remain “well above target” into the first half of next year. The Strait of Hormuz has been closed to most ship traffic for 103 days now.

Central banks in Australia and the Philippines have raises rates since the start of the war, and attention is focusing now on decisions in larger economies. For its part, the U.S. Federal Reserve is expected to keep its key interest rate unchanged when it meets next week with new chair Warsh, appointed earlier this year by President Donald Trump.

Warsh advocated for rate cuts last year and Trump repeatedly attacked Warsh’s predecessor, Jerome Powell, for not cutting borrowing costs deeply enough. Yet with inflation jumping to a three-year high as gas prices have spiked in the wake of the Iran war, even Trump and his officials have started to shift their focus more to a push to keep rates unchanged.

The Fed is likely to change the statement it issues after each meeting by removing language that had suggested that its next move would be a cut. That would open the door for a rate hike down the road. Many Fed officials have warned that if inflation doesn’t begin to cool soon, a rate hike may be necessary by the end of the year.

Raising benchmark rates influences what lenders charge throughout the economy, increasing the cost of borrowing money to buy things and thus dampening demand for goods. Higher central bank rates can send interest costs higher for home purchases, investment in new factories, and government borrowing.

The ECB may be able to get by with only one or two increases because the inflationary surge may be milder than feared, said Carsten Brzeski, global chief of macro at ING bank.

That is because consumers burned by the post-pandemic spike in inflation are in no mood to pay higher prices, leaving businesses little choice but to swallow higher energy costs: “The pass-through of higher energy and input prices to final consumption will be limited due to a lack of ability and willingness of consumers to actually pay for these higher prices,” he wrote in an emailed comment.

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Rugaber reported from Washington.

LONDON (AP) — U.K. Defense Secretary John Healey unexpectedly resigned on Thursday, saying the government isn’t willing to spend enough on the military at a time of “rising threats.”

The resignation is another blow to embattled Prime Minister Keir Starmer, who is already facing demands from Labour colleagues to step down.

Healey told Starmer in a letter that the government’s Defense Investment Plan falls “well short of what is required at this dangerous time.”

Publication of the plan has been delayed amid reports of disagreement between the defense ministry and the Treasury.

Starmer has pledged to boost U.K. defense spending to 2.5% of gross domestic product by 2027 and 3% by 2034. But many in the military say that isn’t fast enough.

“You have been unable, and the Treasury has been unwilling, to commit the resources that the nation needs to defend the country at this time of rising threats,” Healey wrote in his resignation letter.

He said that the spending plan put forward by the Treasury would see defense spending rise to just 2.68% in 2030 after hitting 2.6% next year.

Healey said that isn’t enough with growing demands on defense and British military commitments, citing the Iran war, Russia’s all-out invasion of Ukraine and threats from Moscow.

“I am now left with no other option than to submit my resignation,” he said.

Healey has been U.K. defense secretary since the Labour Party government was elected in July 2024, and he’s regarded as a capable and serious minister.

He has played a key role in bolstering international support for Ukraine and assembling a multinational coalition to help guarantee security if a ceasefire is reached. Healey also has helped spearhead a maritime security force that would help keep the Strait of Hormuz open to shipping if the Iran war ends.

The United Kingdom and other NATO member nations have faced pressure from U.S. President Donald Trump to increase military spending. Trump has long questioned the value of the military alliance and complained that the United States provides security to European countries that don’t pull their weight.

The U.K. military is also seeking to reverse years of decline in the face of an increasingly assertive Russia, which fully invaded its neighbor Ukraine on Feb. 24, 2022, and increasingly tests the defenses of European nations with overt and covert activity.

NATO Secretary-General Mark Rutte, informed of Healey’s resignation by The Associated Press during a news conference in Brussels, said that Healey is someone “I respect very much.”

“What we are seeing all over the alliance is countries increasing their defense investments, and of course it is not easy, because in the end there is always a trade-off with other expenses, which are also important,” Rutte said.

Healey’s resignation is likely to further stoke talk that Starmer’s days as prime minister are numbered. Already bruised by a series of missteps since Labour returned to power less than two years ago, Starmer has faced calls within his party’s ranks to stand down.

He appears to have been unable to bridge the gap between Healey’s department and Treasury chief Rachel Reeves over defense spending.

Greater Manchester Mayor Andy Burnham is widely expected to challenge Starmer for the leadership, if he returns to Parliament in a June 18 special election.

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Mark Carlson in Brussels, and Pan Pylas in London, contributed to this story.

NEW YORK (AP) — On hot afternoons, DeAnna Brandon’s three dogs zag around while she splashes in a backyard kiddie pool with her grandkids. These are the moments the 48-year-old blood cancer survivor cherishes — and wonders if she’ll get to have in the years to come.

Brandon, who lives in Rockwell, North Carolina, is worried that new Medicaid work requirements starting next year could jeopardize her health coverage. She had expected to qualify for a medical frailty exemption, but new guidance introduced by President Donald Trump’s administration last week has thrown that into question.

The interim final rule released by the Centers for Medicare and Medicaid Services means being sick with extreme exhaustion and memory challenges related to her treatments may not be enough for Brandon to evade the new work requirements. She’ll have to attest and later prove that those symptoms “significantly impair” her ability to fulfill the new mandates.

If the government doesn’t accept her case, she could lose her coverage — and the twice-monthly maintenance chemotherapy that keeps her multiple myeloma in remission. Working is “outside of the realm of possibility for me,” she said in an interview.

“I was always a push-through-it person — you know, ‘Oh, you’re tired. Push through,’” Brandon said. “It’s hard to explain to people you can’t push through it.”

Health analysts have sounded the alarm about the Republican Trump administration’s newest guidance, which differs from what states had been expecting. Experts said it will put more Americans at risk of losing their health insurance and force states to scramble in their already harried efforts to implement the changes on time.

“This will mean more paperwork for Medicaid patients — specifically for the sickest Medicaid patients,” said Adrianna McIntyre, a professor at Harvard University’s school of public health. That, she said, “is going to push in the direction of more people needlessly losing coverage.”

Medical frailty rules may mean paperwork nightmares for sick people

The new Medicaid restrictions were part of Trump’s big tax and policy law in 2025. The change affects those covered through an expansion, which most states chose to make, that gave more lower-income people access to the government’s safety net healthcare program.

Expansion enrollees aged 19 to 64 will have to show that they work or do community service at least 80 hours a month or are in school at least half the time. There are exceptions for those considered medically frail or in addiction treatment programs, among others.

Last week’s announcement from CMS caught states off guard with a new definition of medical frailty. The law had said medically frail people include those who have substance use disorders, disabilities or serious medical conditions. But the CMS rule last week went further, saying someone’s condition must “significantly impair” their ability to work, volunteer or attend school at the rates required in the law for them to be granted an exemption.

In 2027 and once in 2028, the patient can attest that they meet this definition. But when they try to renew coverage in 2028, they’ll need to prove it.

Advocates said it’s unclear what kind of documentation could prove that point. They said doctor notes may be required — something some providers don’t feel comfortable writing. Medicaid enrollees fighting disease may carry the bureaucratic burden.

Brandon, who tried to prove she couldn’t work to access disability benefits during her active cancer treatment and failed, said she’s worried about the hoops she and other patients may need to jump through.

“It’s not that easy — you may have to go through four doctors,” Brandon said. “If you’re already battling an illness like this, you don’t have the physical or the mental or the emotional energy to do that all the time.”

States and advocates are confused by the government’s approach

States have been planning to use Medicaid claims data and other data sources to automatically exempt eligible enrollees whenever possible.

CMS Administrator Dr. Mehmet Oz on a call with reporters last week endorsed that approach, saying he hoped most people would be helped “without ever having to talk to anybody.”

Asked to clarify how the rule should be implemented, CMS told The Associated Press in an emailed statement that the agency “chose not to allow states to categorically exclude individuals from work requirements based solely on a diagnosis or condition type.” For renewal in 2028, it said, “verification through claims data or other documentation will generally be required.”

But state Medicaid officials and consultants said Medicaid claims data doesn’t prove someone is significantly impaired from working, and they don’t know of any existing data that does. That has left them confused about how to honor the government’s rule.

“States are going to be asked to make a determination using information that doesn’t exist in their systems,” said Kinda Serafi, a partner at the consulting firm Manatt Health who is working with states to make the changes.

One state, Nebraska, started the new Medicaid work requirements ahead of schedule. But it used diagnostic codes to identify people who are medically frail, and it therefore will likely have to rework its system, said Sarah Maresh, healthcare access program director at the advocacy group Nebraska Appleseed.

Maresh said she was concerned doctors in the rural state who are already reluctant to take Medicaid patients may decide to stop.

“They’re already drowning in paperwork, so to require them to do an additional step of certifying whether someone is able to work, I think is concerning,” she said.

Preparing for the Jan. 1 kickoff of the new policies is an immense and expensive task. A $200 million federal allotment is flowing to states to help, and CMS has partnered with technology companies to provide free and discounted services, but the tab for the additional technology requirements and more staff is likely to exceed $1 billion, according to an AP analysis. That extra cost will be borne by a mix of federal and state tax dollars.

Republicans say the rules will save Medicaid for those who need it most

Republicans promoting the new rules say they are commonsense measures to eliminate government freeloading and preserve benefits for people who need them most. Oz last week, citing a report by the conservative American Enterprise Institute think tank, said able-bodied people on Medicaid spend an average of 6.1 hours a day “watching TV or just hanging out.”

“This is a concern, not a criticism,” he said. “Work requirements are going to turn this around, we hope.”

But current enrollees who don’t meet the work requirement threshold said that’s a misrepresentation of their experience.

Mids Meinberg, a 42-year-old freelance writer from New Jersey who lives with chronic depression and diabetes, said that even with his health issues, he’s proud to have found a meaningful career. But his conditions make him unable to work 80 hours a month. He said he thinks there are many people with disabilities who are “too disabled to work but not disabled enough for the state to think they can’t work.”

Brandon, in North Carolina, said she wants the government to understand that she’s “not just sitting around wasting time or being a drain on society.”

“I’m pouring into my grandchildren,” she said. “We’re valuable, and we can still contribute to our communities even if it’s not working.”