European Central Bank monetary policy meeting of June 10-11, 2026

The European Central Bank held its monetary policy meeting on June 10-11, 2026, in Frankfurt am Main. The Governing Council reviewed recent financial, economic, and monetary developments, focusing on inflation, growth prospects, and policy measures amid ongoing geopolitical tensions and energy shocks.

Ms. Schnabel presented an analysis of financial market developments, noting that since the April 2026 meeting, euro area markets had been influenced by the Middle East conflict and a global AI investment boom. Oil prices had declined from USD 118 to USD 94 per barrel, while gas prices remained about 50% above pre-war levels. Energy prices had increased significantly for refined products, fertilisers, and plastics, feeding into broader inflation risks. Market-based inflation expectations for 2026 and early 2027 had declined but remained above target, with upside risks to medium-term inflation since the outbreak of the conflict.

Markets continued to expect a series of interest rate hikes, with a 25 basis point increase in June and September, and an 84% probability of a third hike by year-end. The euro area economy contracted by 0.2% in Q1 2026, mainly due to a decline in Irish multinational activity, but domestic demand remained resilient. The labour market stayed tight, with unemployment at 6.3%, and employment growth slowing slightly. The euro had depreciated moderately against the US dollar, reflecting ongoing uncertainty.

Mr. Lane discussed global and euro area economic developments, highlighting elevated uncertainty due to the Middle East conflict. Inflation increased to 3.2% in May, driven mainly by energy prices, with core inflation rising to 2.5%. The June projections forecast inflation averaging 3.0% in 2026, gradually declining thereafter. Growth was revised down to 0.8% for 2026, supported by domestic demand and government spending, but risks remained to the downside due to energy prices and geopolitical tensions.

The Governing Council assessed that inflation risks were to the upside, with potential for energy prices to rise further and spill over into broader inflation. Conversely, risks to growth were to the downside, especially if energy supply disruptions persisted. The Council supported a 25 basis point rate hike, citing the need to contain inflationary pressures and maintain credibility, given the persistent energy shock and inflation outlook.

Members emphasized a data-dependent, meeting-by-meeting approach, with communication focused on the robustness of the decision across various scenarios. The Council reaffirmed its commitment to achieving 2% inflation in the medium term and will continue monitoring inflation, energy prices, financial conditions, and geopolitical developments to guide future policy actions.

The next monetary policy account is scheduled for release on August 27, 2026.