ECB Hikes Rates but Refuses to Commit to Future Hikes

The European Central Bank (ECB) raised interest rates as expected to 2.5%, but its decision was met with mild losses in the euro's value.

According to the source, Christine Lagarde, ECB President, refused to commit to future rate hikes, taking a 'Kevin Warsh' stance, which implies that she is keeping her options open due to the supply shock-driven inflation in the Eurozone.

The ECB revised its inflation expectations upward, forecasting 2.1% inflation in 2028, just above the target level. This suggests that ECB economists believe the energy price shock will have a long-term effect on the economies of the single market.

Lagarde's cautious tone weighed on the euro, which moved back towards $1.16, as the market assumed the ECB may not be as hawkish as some expect, despite likely future rate hikes.