Following the decision by the Governing Council, the interest rates on the deposit facility, main refinancing operations and marginal lending facility will rise to 2.25 per cent, 2.40 per cent and 2.65 per cent respectively, effective from June 17, 2026, the ECB said in a press release.
The European Central Bank (ECB) has raised its three key interest rates by 25 basis points, citing inflation risks from the Middle East conflict and higher energy prices.
The deposit rate will rise to 2.25 per cent from June 17.
The ECB forecasts euro area inflation at 3.0 per cent in 2026 and growth at 0.8 per cent, while maintaining a data-dependent approach to future policy decisions.
The ECB said the conflict is creating upward pressure on prices, particularly through higher energy costs, and that the rate increase remains appropriate across a range of possible economic scenarios. Updated Eurosystem staff projections indicate that headline inflation in the euro area is expected to average 3 per cent in 2026, 2.3 per cent in 2027 and 2.0 per cent in 2028.
Inflation excluding energy and food is projected at 2.5 per cent in both 2026 and 2027, before easing to 2.2 per cent in 2028. Compared with forecasts issued in March, inflation estimates for 2026 and 2027 have been revised upwards due to a higher expected trajectory for energy prices, which is also anticipated to affect food, goods and services costs.
At the same time, the ECB lowered its growth outlook. Euro area economic growth is now forecast at 0.8 per cent in 2026, 1.2 per cent in 2027 and 1.5 per cent in 2028. The revisions reflect the anticipated impact of the conflict on commodity markets, household incomes and business confidence.
The central bank noted that the economic outlook remains highly uncertain, with upside risks to inflation and downside risks to growth. The eventual impact will depend on the duration and severity of the energy price shock and the extent of any indirect effects on the broader economy.
The Governing Council reiterated that future policy decisions will remain data-dependent and be taken on a meeting-by-meeting basis. It emphasised that it is not pre-committing to any specific interest-rate path and will continue to assess incoming economic and financial data, underlying inflation trends and the effectiveness of monetary policy transmission.
Meanwhile, the ECB confirmed that the Asset Purchase Programme (APP) and Pandemic Emergency Purchase Programme (PEPP) portfolios will continue to decline steadily, as the Eurosystem no longer reinvests principal payments from maturing securities.
Fibre2Fashion News Desk (SG)
