Euro Tumbles as ECB Hikes Rates Again Amid Soaring Inflation

The euro dipped below $1.16 on Friday as investors digested the European Central Bank's (ECB) latest policy decision and weighed the potential for further rate hikes. The ECB raised interest rates by 25 basis points on Thursday, warning that inflation is likely to remain above its 2% target until at least the end of 2027.

ECB President Christine Lagarde described the decision as a 'no-brainer' and cautioned that the return of inflation to target could be delayed further. The inflation outlook has deteriorated so sharply that another rate hike is now considered increasingly likely, potentially coming as soon as October.

Money markets are pricing in three additional ECB rate increases by March next year, followed by a fourth hike by June. This suggests that investors expect the ECB to continue tightening monetary policy to combat inflation, which has risen sharply in recent months.