Germany’s 10-year Bund yield held steady just above 3.05%, hovering near a three-week high, after the European Central Bank delivered a widely expected 25-basis-point rate hike—its first since 2023. The decision came as policymakers underscored mounting energy costs and lingering inflationary pressures, exacerbated by the conflict involving Iran and disruptions to oil flows through the Strait of Hormuz.
In response, the ECB raised its inflation projections, now seeing headline inflation at 3.0% in 2026 (up from 2.6%) and 2.3% in 2027 (up from 2.0%). Core inflation is forecast at 2.5% for both 2026 and 2027, compared with previous estimates of 2.3% and 2.2%, respectively. At the same time, the growth outlook was trimmed: Eurozone GDP is now expected to expand by 0.8% in 2026 (down from 0.9%) and 1.2% in 2027 (down from 1.3%).
Adding to the cautious mood, tensions in the Middle East intensified, with ongoing military strikes and diplomatic setbacks further dimming hopes for a negotiated resolution between the United States and Iran.
