ECB raises interest rates by 25 basis points amid inflation pressures

The Governing Council of the European Central Bank (ECB) has decided to raise the three key interest rates by 25 basis points, effective from June 17, 2026. The deposit facility rate will increase to 2.25%, the main refinancing operations rate to 2.40%, and the marginal lending facility to 2.65%.

This decision aims to ensure inflation stabilizes at the 2% target in the medium term, despite inflation pressures from the ongoing war in the Middle East. The ECB’s staff projections forecast headline inflation averaging 3.0% in 2026, 2.3% in 2027, and 2.0% in 2028, with inflation excluding energy and food at 2.5% in 2026 and 2027, and 2.2% in 2028.

Economic growth is projected at 0.8% in 2026, 1.2% in 2027, and 1.5% in 2028, with downward revisions for 2026 and 2027 due to the war’s impact on markets and incomes. The outlook remains uncertain, with upside risks for inflation and downside risks for growth, depending on the war’s duration and energy price shocks.

The ECB will monitor economic data closely and adopt a data-dependent, meeting-by-meeting approach for future policy decisions. The Governing Council retains flexibility and is not committed to a specific rate path.

The asset purchase programmes (APP and PEPP) are gradually declining as principal payments from maturing securities are no longer reinvested. The Transmission Protection Instrument remains available to counter market disruptions affecting monetary policy transmission across the euro area.

The ECB President will hold a press conference at 14:45 CET to discuss these decisions.