The European Central Bank Becomes First Major Central Bank to Hike Rates Since Inflation Surge

June 11: The European Central Bank (ECB) raised interest rates for the first time in nearly three years, becoming the first major developed-world central bank to act on inflation spurred by tensions related to the Iran war. The central bank lifted its benchmark main rate from 2% to 2.25%—a move widely expected by markets—while highlighting headwinds facing major economies from the prolonged closure of the Hormuz Strait, which has pushed energy prices sharply higher. Investors broadly anticipate the ECB will hike rates at least once more this year. This policy shift also makes the ECB the first major central bank to tighten monetary policy directly in response to surging energy costs, which have pushed eurozone inflation above 3%. Turning to other key central banks: The Federal Reserve is projected to keep interest rates unchanged next week, with Chair Jerome Powell caught between Trump’s calls for low rates and mounting inflation pressure. The Bank of England is also expected to hold rates steady next week. (Source: FXStreet)