ECB Hikes Deposit Rate to 2.5%, Sets Stage for Further Tightening

The European Central Bank (ECB) has raised its deposit rate to 2.5% from 2.25%, marking a widely expected quarter-point hike in response to rising inflation and energy costs.

LSEG data showed that traders had assigned a 100% probability to the move, indicating a high degree of certainty among market participants.

ECB President Christine Lagarde stated that the euro area has shown 'greater-than-expected resilience' but cautioned that energy price shocks and global trade tensions remain significant threats to growth.

Marcio Fernandes, economist at Aberdeen, expects another rate increase in December, citing the eurozone's ability to absorb higher energy prices and geopolitical uncertainty. Patrick Ernst, macro investment strategist at JP Morgan Private Bank, believes policymakers have kept the door open for further tightening, emphasizing that 'one hike is not a ceiling'.