The Fed hikes six days after the ECB, weighing on the Euro
The Fed has raised its rate to 3.75-4.00%, its first increase since 2023 and its first move of any kind since the cut in December 2025. Six days ago the European Central Bank (ECB) raised its deposit rate, the return banks earn on money parked with it, by the same quarter-point to 2.50%.
The Federal Reserve (Fed) raised its key interest rate six days after the European Central Bank (ECB) made its move, causing the Euro to weaken. The Fed increased its deposit rate by a quarter-point to 3.75-4.00%, marking its first hike since 2023. In contrast, the ECB had raised its rate by the same margin to 2.50% six days prior.
The Fed's interest rate is higher than the ECB's by 1.375 points, effectively making the US Dollar stronger. After the Fed's decision, the Euro depreciated by approximately 34 pips, reaching just under 1.1500, with a notable 58-pip decline from its pre-release high. Traders reacted cautiously, as the market momentum was only moderately strong.
The Fed's decision to raise rates is aimed at controlling inflation, while the ECB's rate increase helps maintain price stability and promote full employment.
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