Markets prepare for ECB rate hikes: borrowing costs are already rising

Eurozone financial markets have effectively already priced in the expected 0.25 percentage point rate hike by the European Central Bank. This is evidenced by the dynamics of the Euribor interbank rate, which has been growing steadily since the end of the regulator's previous meeting and is approaching the 2.20% mark.

Experts note that the market did not wait for the June ECB meeting and began adjusting expectations in advance. In April, the Euribor rate fluctuated in the range from 2.075% to 2.243%, indicating a gradual tightening of financial conditions.

Rising rates are already reflecting on borrowing costs. According to ECB President Christine Lagarde, the average yield on corporate bonds increased to 3.9% in March, compared to 3.5% a month earlier. This means it is becoming more expensive for companies and banks to raise financing.

At the same time, banks are tightening lending conditions. According to the latest ECB survey, in the first quarter of 2026, credit standards became stricter amid rising economic risks. Demand for loans, especially for investment, has also started to decline, indicating cautious business behavior.

An additional factor for caution remains the high pressure on the banking sector. In some countries, the loan-to-deposit ratio exceeds 100%, which increases risks and forces financial institutions to act more conservatively.

At the same time, experts emphasize that rate hikes are likely to be moderate, and the market has already partially adapted to the new conditions.