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, marks the first major central bank to raise borrowing costs since the Iran shock rattled global markets earlier this year.
The move signals a decisive pivot toward tightening, as policymakers attempt to anchor inflation expectations that have proven stubbornly resilient.
By acting first among major peers, the ECB is betting that preemptive tightening can prevent a wage-price spiral, even as geopolitical risks in the Middle East continue to weigh on growth.
a stagflationary scenario, where higher rates collide with supply-side shocks from the region.
Eurozone equity indices fell on the news, while the euro strengthened against the dollar as traders adjusted their expectations for the European growth outlook.
Bond yields rose across the curve, reflecting the market's reassessment of the ECB's policy trajectory.