ECB Set to Raise Interest Rates for 1st Time Since 2023

2026-06-11 07:02 By Joana Ferreira 1 min. read

The ECB is widely expected to raise interest rates by 25bps at its June 2026 meeting as policymakers respond to surging energy costs and the growing risk of persistent inflation amid the conflict with Iran and disruptions to oil shipments through the Strait of Hormuz.

The move would mark the ECB's first rate increase since 2023, lifting the deposit facility rate to 2.25%.

The expected hike comes after euro area inflation accelerated to 3.2% in May, remaining well above the ECB's 2% target.

Core inflation also rose to 2.5% from 2.2% in April.

Alongside the rate decision, the ECB will release updated macroeconomic projections, with experts anticipating significant upward revisions to inflation forecasts for 2026 and 2027.

Investors will closely parse President Lagarde’s press conference for clues on future policy moves.

Markets currently expect at least one more rate hike this year, though uncertainty lingers after data revealed the eurozone economy contracted in Q1 2026.



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ECB Set to Raise Interest Rates for 1st Time Since 2023
The ECB is widely expected to raise interest rates by 25bps at its June 2026 meeting as policymakers respond to surging energy costs and the growing risk of persistent inflation amid the conflict with Iran and disruptions to oil shipments through the Strait of Hormuz. The move would mark the ECB's first rate increase since 2023, lifting the deposit facility rate to 2.25%. The expected hike comes after euro area inflation accelerated to 3.2% in May, remaining well above the ECB's 2% target. Core inflation also rose to 2.5% from 2.2% in April. Alongside the rate decision, the ECB will release updated macroeconomic projections, with experts anticipating significant upward revisions to inflation forecasts for 2026 and 2027. Investors will closely parse President Lagarde’s press conference for clues on future policy moves. Markets currently expect at least one more rate hike this year, though uncertainty lingers after data revealed the eurozone economy contracted in Q1 2026.
2026-06-11
ECB Officials Were Open to a Rate Rise in April: Minutes
A number of ECB members viewed the April decision to keep rates unchanged as a close call and indicated they would have supported a rate hike had it been proposed, according to the latest ECB meeting minutes. Policymakers warned that the energy-driven supply shock was proving more persistent than previously expected, increasing the risk of broader and more entrenched inflationary pressures, while the war in the Middle East was seen as a key source of uncertainty for both inflation and growth. Members also acknowledged the increasingly difficult trade-off facing monetary policy, as slowing economic activity and weakening confidence coincided with rising inflation risks. Several officials noted that even with two projected rate hikes this year, inflation was still expected to remain slightly above the ECB’s target. Investors expect the ECB to raise its key rates by 25 basis points on June 11, with at least one additional hike priced in by the end of the year.
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The European Central Bank kept interest rates unchanged at its April meeting, with the main refinancing rate at 2.15% and the deposit facility at 2.0%, as policymakers adopted a cautious stance, assessing the impact of the Iran war on inflation and growth. While the ECB remains well-positioned to navigate uncertainty, officials noted that upside risks to inflation and downside risks to growth have intensified. They emphasized that longer-term inflation expectations remain anchored, though shorter-term expectations have risen significantly. At the post-meeting press conference, ECB President Christine Lagarde said the decision to hold rates was unanimous, though policymakers debated various options, including a possible hike. She added that the discussion centered on the fact that the ECB is "certainly moving away" from its baseline scenario.
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