Money markets have adjusted their expectations for the European Central Bank's (ECB) June rate hike, reducing it from 25 to 23 basis points. This change reflects a more moderate stance on monetary tightening amid ongoing geopolitical tensions and inflation concerns. The ECB has highlighted the impact of the Middle East conflict on oil prices and Eurozone inflation, which reached 3.0% in April 2026.The ECB's Governing Council has emphasized heightened inflation risks and downside growth risks, adopting a data-dependent approach without committing to a specific rate path. With the current key deposit facility rate at 2.00%, markets anticipate a slightly less aggressive approach to monetary policy tightening. Market participants will closely monitor upcoming statements from ECB President Christine Lagarde and other officials for further indications of policy direction.