European Central Bank increases interest rates by 25 basis points

The European Central Bank (ECB) has raised interest rates by 25 basis points, effective June 17, 2026. This decision brings the deposit facility rate to 2.25%, the main refinancing operations rate to 2.40%, and the marginal lending facility rate to 2.65%. ECB President Christine Lagarde stated that future policy decisions will be made meeting-by-meeting due to significant uncertainty regarding the conflict in the Middle East. The central bank revised its inflation outlook upward, projecting average headline inflation of 3.0% for 2026, 2.3% for 2027, and a return to the 2.0% target in 2028. Under an adverse scenario of a prolonged conflict, inflation could reach as high as 4% in 2026 and 5.3% in 2027. Officials indicated that further rate hikes are possible in September and potentially toward the end of the year depending on the intensity of the war. Economic growth forecasts have also been reduced due to the inflationary pressures caused by rising energy prices.