ECB raises rate to 2.25%, first G7 hike since 2023
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The European Central Bank raised its key interest rate to 2.25% on Thursday, the first increase by a G7 central bank since 2023. The decision surprised markets, which had expected a hold, and sent the euro higher against the dollar.
The Rate Decision
The ECB's Governing Council raised the deposit facility rate by 25 basis points to 2.25%, the first increase since September 2023. The move breaks a streak of holds by major central banks and signals concern over persistent inflation in the eurozone. ECB President Christine Lagarde cited wage growth and services inflation as key drivers.
Market Reaction
The euro jumped 0.8% against the U.S. dollar to $1.0920 immediately after the announcement. European bond yields rose, with the German 10-year Bund yield climbing 12 basis points to 2.45%. Analysts at Goldman Sachs called the decision a 'hawkish surprise' and revised their rate path forecasts.
What's Next
The ECB is scheduled to hold its next policy meeting on July 30. It remains unclear whether further hikes will follow, as Lagarde emphasized a data-dependent approach and avoided committing to a specific trajectory.
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ECB raises rate to 2.25%, first G7 hike since 2023
