European Central Bank raises interest rates with hawkish guidance - Financial Times

The European Central Bank raised interest rates and paired the decision with hawkish guidance, signaling that policymakers remain focused on bringing inflation back to target even as growth prospects weaken. The move reflects the ECB's judgment that price pressures are still persistent enough to warrant tighter financing conditions.

For markets, the significance lies less in the rate change itself than in the guidance accompanying it. Hawkish forward language can shift expectations for where policy rates will peak and how long they will stay elevated. That matters across asset classes: it typically influences euro exchange rates, eurozone government bond yields, and rate-sensitive sectors such as real estate and banking. It can also widen the policy gap with other major central banks, with spillovers into global currencies and capital flows.

What to watch next: incoming eurozone inflation and wage data, the ECB's own updated projections, and whether officials push back on or validate market pricing for future moves. The tension between fighting inflation and supporting growth is likely to keep volatility elevated around ECB communications.