ECB Hikes Rates Amid Weakening Labor Market Expectations

The European Central Bank (ECB) has raised interest rates for the first time since September 2023, hiking them by 25 basis points to 2.25%. This decision was announced by ECB President Christine Lagarde during a press conference on June 11.

Lagarde noted that while the euro area labor market appears solid, with unemployment at 6.3% as of April 2026 near historical lows, there is a shift in expectations. Both firms and households now anticipate weaker labor markets ahead, which tends to matter more than backward-looking employment data.

The ECB's revised GDP forecasts are cautious, projecting 0.8% growth for 2026, increasing to 1.2% in 2027 and 1.5% in 2028. Headline inflation is expected to remain above the ECB's 2% target at 3.0% for 2026.

The widening gap between projected GDP growth and inflation could lead to further rate hikes, creating uncertainty that may impact risk assets, including cryptocurrencies.