European Central Bank raises interest rates with hawkish guidance - Financial Times

The European Central Bank has raised interest rates again, pairing the decision with guidance that markets read as hawkish — signalling that policymakers remain focused on bringing inflation back to target rather than pivoting quickly toward cuts. The move reflects the ECB's ongoing balancing act: tightening financing conditions to cool price pressures while trying to avoid unnecessarily deep damage to growth.

For markets, the emphasis on guidance matters as much as the rate change itself. Hawkish communication typically supports the euro and pushes short-term bond yields higher, as investors adjust expectations for how long rates stay elevated. Rate-sensitive sectors — real estate, utilities and highly indebted companies — often feel the pinch first, while bank shares can respond to the outlook for lending margins.

What to watch next: incoming eurozone inflation and wage data, the ECB's tone at upcoming meetings, and how financial conditions transmit through credit and housing. The key question is whether the central bank can hold a restrictive stance long enough to tame inflation without tipping the economy into a sharper slowdown.