ECB Hike Boosts Euro as Inflation Projections Rise

The European Central Bank (ECB) raised its policy rate by 25 basis points to 2.50%, marking a hawkish move that supports the euro against the US dollar. EUR/USD is trading around 1.1600.

ECB President Christine Lagarde called the decision 'a no brainer', and signaled more hikes are in the pipeline due to inflation above target for an extended period. The ECB revised its baseline inflation projection higher for 2027 and 2028, while leaving 2026 unchanged.

The bank also cautioned that the outlook remains highly uncertain, with risks to the upside for inflation and to the downside for economic growth. However, EU-US rate differentials remain broadly supportive for EUR/USD, according to BBH's Elias Haddad.