The European Central Bank has initiated its first interest-rate tightening cycle since 2023, lifting the deposit facility rate by a quarter point to 2.25%.
The decision, confirmed Thursday, signals a decisive pivot toward monetary restraint as policymakers grapple with persistent inflationary pressures and a deteriorating economic outlook.
The move comes against a backdrop of intensifying geopolitical risk, with the central bank explicitly acknowledging the economic fallout from the recent shock in Iran.
The conflict has disrupted energy flows and supply chains, pushing up costs for European businesses and consumers.
This external pressure complicates the ECB's dual mandate, forcing a choice between supporting a fragile economy and anchoring inflation expectations.
Market participants are now pricing in a more hawkish trajectory for the eurozone.