The European Central Bank (ECB) said in its Financial Stability Review on Wednesday that an abrupt increase in real interest rates could induce corrections in the real estate market, per Reuters.

"An abrupt increase in real interest rates could induce house price corrections in the near term, with the current low level of interest rates making substantial house price reversals more likely," the ECB explained. "Further corrections in financial markets could be triggered by escalation of war, even weaker global growth or if monetary policy needs to adjust faster than expected."

Market reaction

EUR/USD extended its downward correction on the ECB's publication and was last seen losing 0.6% on the day at 1.0670.