The European Central Bank just did something it hasn’t done since 2023: it raised interest rates. Energy prices, supercharged by Middle East tensions including the ongoing conflict in Iran, have pushed inflation well past the ECB’s comfort zone.
ECB President Christine Lagarde announced the hike on June 11, 2026, acknowledging that high energy prices are no longer a contained problem. They’re bleeding into other parts of the economy.
Energy price inflation hit 10.9% as of May 2026. Headline inflation climbed from 3.0% in April to 3.2% in May. For a central bank that targets 2%, those numbers represent a problem that can’t be solved by waiting it out.
The numbers paint a grim picture
The ECB’s June 2026 projections tell a story of an economy caught between rising prices and slowing growth. Headline inflation is forecast to average 3.0% for 2026, falling to 2.3% in 2027 and finally reaching the 2.0% target in 2028.
