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

The European Central Bank has raised interest rates, pairing the decision with guidance that markets read as hawkish — signalling a continued focus on bringing inflation back to target rather than an imminent pivot toward easing. For investors, the key takeaway is that the cost of money in the euro area is likely to stay higher for longer than previously assumed.

Higher policy rates transmit through the economy in several ways. They raise borrowing costs for households and firms, tighten financial conditions, and tend to weigh on rate-sensitive sectors such as real estate and long-duration growth assets. They can also support the euro, which matters for exporters and for imported inflation.

What to watch from here: incoming inflation and wage data, the ECB's tone at upcoming meetings, and how euro-area government bond yields respond. The central question is whether inflation cools enough to allow a pause, or whether persistent price pressure keeps policymakers leaning restrictive.