The European Central Bank just raised interest rates for the first time since 2023. And officials are making clear they’re not done yet.
ECB policymakers have signaled that the inflation shock triggered by the Iran war, which began on February 28 with coordinated US and Israeli military strikes, hasn’t been neutralized. Even with hostilities largely subsiding, the damage to energy markets and consumer prices has already been baked in. Eurozone inflation hit roughly 3% in the April-May period, a sharp jump from 1.9% before the conflict started.
The rate hike and what’s behind it
At its June 11-12 meeting, the ECB raised its main refinancing and deposit facility rates by 25 basis points. That’s the first upward move in over three years, and it came as a direct response to an inflation trajectory that has veered well above the bank’s 2% target.
The central bank has also revised its 2026 headline inflation forecast upward to 3.0%.
