ECB Rate Hike Trims Euro Losses Amid Ongoing Inflation Concerns

The European Central Bank (ECB) delivered its second interest rate hike since the US-Iran war began, as expected. This move saw the euro trim earlier losses to trade around $1.162. The ECB warned that inflation is likely to remain above its 2% target for an extended period.

The central bank kept its 2026 inflation forecast at 3.0%, but raised its projections for 2027 and 2028 to 2.5% and 2.1%, respectively. GDP growth forecasts were upgraded to 0.9% for 2026 and 1.4% for 2027, reflecting the euro area economy's resilience.

The 2028 growth forecast remained unchanged at 1.5%. The ECB's decision was seen as a cautious move, acknowledging the ongoing inflation concerns while also recognizing the economy's strength.