The European Central Bank’s Governing Council increased the three key interest rates by 25 basis points to combat inflation pressures, with decisions effective from June 17, 2026, amid ongoing geopolitical uncertainties.
The Governing Council of the European Central Bank (ECB) has decided to raise the three key interest rates by 25 basis points. The new rates will be 2.25% for the deposit facility, 2.40% for the main refinancing operations, and 2.65% for the marginal lending facility, effective from June 17, 2026.
This decision aligns with the ECB’s commitment to stabilize inflation at its 2% target in the medium term. The decision was influenced by inflation pressures stemming from the war in the Middle East, which has increased inflation risks across the euro area.
According to the latest Eurosystem staff projections, headline inflation is expected to average 3.0% in 2026, 2.3% in 2027, and 2.0% in 2028. Inflation excluding energy and food is projected at 2.5% in 2026 and 2027, and 2.2% in 2028. These projections have been revised upward compared to March due to higher energy prices, which are expected to influence food, goods, and services inflation.
Economic growth is forecasted at an average of 0.8% in 2026, 1.2% in 2027, and 1.5% in 2028, with downward revisions for 2026 and 2027 reflecting the war’s impact on commodity markets, real incomes, and confidence.
The outlook remains uncertain, with upside risks for inflation and downside risks for growth. The full effects of the war depend on the energy price shock’s intensity and duration, as well as its indirect effects. The ECB will monitor incoming data and adopt a data-dependent, meeting-by-meeting approach to policy decisions, without pre-committing to a specific rate path.
The asset purchase programs (APP and PEPP) are being phased out through predictable principal payments from maturing securities.
The ECB stands ready to adjust its instruments to ensure inflation stabilizes at 2% and to maintain effective monetary policy transmission. The Transmission Protection Instrument remains available to counteract disorderly market dynamics that threaten policy transmission across the euro area.
The ECB President will hold a press conference at 14:45 CET to discuss the decision’s considerations.
