ECB Hikes Rate to 2.5%, Markets React to Energy Price Surge
The European Central Bank (ECB) has raised its key interest rate to 2.5%, as energy prices surge and inflation concerns intensify. The decision, which marks a further tightening of monetary policy in Europe, was made in response to rising global energy costs caused by the war between the United States and Iran.
According to the ECB's forecast, inflation will remain significantly above its target for an extended period, with projections indicating 3% price growth in 2026 and 2.5% in 2027.
Markets reacted sharply to the news, with the yield on 10-year German government bonds climbing to a multi-year high of 1.95%, while the yield on 30-year French bonds reached its highest level since 2003.
Aimeric Gedi, head of the Carmignac fund, noted that ECB President Christine Lagarde's hawkish rhetoric on inflation has intensified pressure on eurozone bonds amid a global sell-off.