European Central Bank raises interest rates by 25 basis points in first hike since 2023

The European Central Bank just hit the brakes. After months of cutting rates to stimulate the eurozone economy, the ECB’s Governing Council reversed course on June 11, raising all three key interest rates by 25 basis points. It’s the first rate increase since September 2023, and it marks a significant shift in a monetary policy that had been trending steadily dovish.

The deposit facility rate now sits at 2.25%, up from 2.00%. The main refinancing operations rate moved to 2.40%, and the marginal lending facility rate climbed to 2.65%. None of this was a surprise. Market expectations ahead of the decision showed a 99-100% probability of the hike, meaning traders had already baked it into their positions.

Inflation forced the ECB’s hand

Headline inflation in the eurozone has surged above 3%, well beyond the ECB’s 2% target. The primary culprit is energy costs. Geopolitical tensions in the Middle East, particularly surrounding the Strait of Hormuz, have pushed oil and gas prices higher. The Strait of Hormuz is the narrow waterway through which roughly a fifth of the world’s petroleum passes daily.

ECB President Christine Lagarde emphasized that the central bank remains “data-dependent” and committed to its 2% inflation target, without pre-committing to any specific path for future hikes.

The deposit rate peaked at 4% in 2023 during the aggressive tightening cycle aimed at taming post-pandemic inflation. Then came the easing cycle that kicked off in mid-2025, gradually bringing rates down to the 2% level. Now, with inflation reaccelerating, the pendulum swings again.

Why this matters beyond Europe

The ECB manages monetary policy for 20 countries and hundreds of millions of people. Higher rates in Europe make euro-denominated bonds and savings accounts more attractive relative to riskier investments, and money migrates away from assets that carry more uncertainty, including equities and digital assets.

The crypto bull runs of 2020-2021 coincided with near-zero rates globally. The painful drawdowns of 2022-2023 happened alongside the most aggressive rate-hiking cycle in decades. The fully priced nature of this particular hike likely limits the immediate fallout, as markets tend to move on surprises.

What this means for investors

Bitcoin lost more than 70% of its value from its all-time high as central banks worldwide ratcheted up borrowing costs throughout 2022. The deposit rate at 2.25% is still historically moderate, well below the 4% peak of 2023, but the direction of travel has changed.

If the ECB is tightening while the Fed holds steady or cuts, the euro strengthens against the dollar, creating cross-currents for globally traded assets like Bitcoin and Ethereum, which are primarily denominated in dollars.

Disclosure: This article was edited by Editorial Team. For more information on how we create and review content, see our Editorial Policy.