ECB raises interest rates, as widely expected
LONDON - The European Central Bank raised interest rates on Thursday, in a aimed at curbing mounting inflationary pressures before a surge in energy costs triggered by the Iran war spreads more broadly across the euro zone economy.
Inflation in the 21-country currency bloc is already above 3%, well in excess of the ECB's 2% target, and economic growth is very weak - a backdrop that has economists split over the case for tighter policy.
The euro was last a touch lower on the day at $1.1536, but little changed from where it had been prior to the decision. Short-dated euro zone bond yields, the most sensitive to shifts in monetary policy, edged up as prices fell modestly.
Two-year German bond yields were down half a point at 2.7%, but up from around 2.678% earlier in the day.
The STOXX 600 pared some of the day's gains to show a 0.4% rise on the day, having traded up nearly 1% prior to the central bank's decision.
COMMENTS:
RICHARD CARTER, HEAD OF FIXED INTEREST RESEARCH, QUILTER CHEVIOT, LONDON:
"Markets are already pricing in a further rate hike at the ECB's September meeting, but whether that materialises will depend heavily on developments in the Middle East and whether, and when, a meaningful resolution can be achieved. If a resolution is not met soon, we can expect higher energy costs to persist and broader inflationary pressures to mount, meaning policymakers may be forced to act again. The attention will now shift to whether the other major central banks will follow the ECB's lead, but for now that looks unlikely."
ANDRZEJ SZCZEPANIAK, SENIOR EUROPEAN ECONOMIST, NOMURA, LONDON:
"I think the key thing is the ECB still has inflation at target in 2028, so they're forecasting 2% for that. In terms of core inflation at the margin, it's slightly stickier and more persistent than we had pencilled in. So we had expected them to have 2.5%, 2.4%, and 2.1%. Instead, they have 2.5%, 2.5%, and 2.2%. So maybe a slightly stronger persistence in underlying inflation pressures due to the Iran war."
KIRSTINE KUNDBY-NIELSEN, FX AND FIXED INCOME RESEARCH, DANSKE BANK, COPENHAGEN:
"New staff projections are revised to the hawkish side compared to our expectations. Inflation is revised slightly higher than we anticipated and growth is not revised down as much. Hawkish staff projections, but markets more driven by Trump."
(Reporting by EMEA Markets Team; Compiled by Amanda Cooper)
Copyright Reuters or USA Today Network via Reuters Connect.
This story was originally published June 11, 2026 at 7:35 AM.