The European Central Bank just did something it hasn’t done in three years: raise interest rates. On June 11, the ECB lifted its deposit facility rate by 25 basis points to 2.25%, reversing course after a prolonged easing cycle that had brought the rate down to 2.0% by early 2026.
The reason is straightforward. Eurozone inflation hit 3.2% in May 2026, the highest reading since September 2023, and the central bank decided it was done watching from the sidelines.
Energy prices drove inflation up, now they might bring it back down
The inflation spike wasn’t some broad-based mystery. Energy prices did the heavy lifting, with energy inflation running at roughly 10.8% to 10.9% year-on-year in May. The culprit: ongoing conflict in the Middle East that disrupted shipping through the Strait of Hormuz, one of the world’s most critical oil chokepoints.
Eurosystem staff projections pegged oil prices at an average of $112 per barrel in the second quarter of 2026.
