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The euro fell to a six-month low after the European Central Bank raised interest rates to a record high, but hinted the move could be the last in its campaign of monetary tightening.
The euro traded as low as $1.0632 on Thursday after ECB policymakers announced their decision to raise interest rates by a quarter of a percentage point to a record high of 4 percent. At the end of the trading day in New York, the price fell 0.8 percent to $1.0644.
The European region-wide Stoxx Europe 600 index closed the day 1.5 percent higher, while France’s CAC 40 rose 1.2 percent and Germany’s Dax rose 1 percent.
In a statement published alongside its decision, the ECB said interest rates “have reached a level that, if maintained for a sufficiently long period, will make a substantial contribution to the timely return of inflation to the target level” .
Francesco Pesole, forex strategist at ING, said the language “essentially suggests that the ECB may have reached the peak of the tightening cycle.”
“Markets are giving fairly more weight to the easing tips for now, also considering the data flow in the eurozone has been quite grim lately,” Pesole added.
![Line chart of $ per € showing the euro falling after a dovish statement from the ECB](https://www.ft.com/__origami/service/image/v2/images/raw/https%3A%2F%2Fd6c748xw2pzm8.cloudfront.net%2Fprod%2F9d14f160-5318-11ee-9233-f70319c0ddd1-standard.png?source=next-article&fit=scale-down&quality=highest&width=700&dpr=1)
The ECB’s policy decision comes amid increased investor concern about a looming economic downturn, with the European Commission recently cutting its growth forecast for the 27-nation union to 0.8 percent this year and 1.4 percent in 2024.
“Against the weaker growth backdrop, the ECB may likely pause at its next meeting and if growth prospects continue to deteriorate, a pause could turn into a spike,” said Mike Bell, strategist at JPMorgan Asset Management.
The ECB has now raised borrowing costs for ten consecutive policy meetings since July 2022 in an effort to tackle high inflation. Annual price increases have since slowed to 5.3 percent as of August, and there is still some way to go until inflation reaches the central bank’s 2 percent target.
Elsewhere, U.S. retail sales grew more than forecast in August, the Commerce Department said Thursday, as a rise in gasoline prices outweighed subdued spending elsewhere in the economy. The retail sales data came after the US reported on Wednesday that gasoline prices pushed up headline inflation in August.
Market moves on Thursday suggested investors did not believe retail sales or consumer price data would force the Federal Reserve to raise rates at its meeting next week. The S&P 500 index and the tech-heavy Nasdaq Composite both rose 0.8 percent on Thursday.
Investor and policymakers’ concerns about persistent price pressures have grown in recent days as oil prices rose to their highest levels since late last year following the extension of supply cuts by some of the world’s largest producers.
Brent crude, the international benchmark, was 2 percent higher at $93.70 per barrel on Thursday. The American equivalent West Texas Intermediate reached $90 for the first time this year and closed 1.9 percent higher to $90.16.