The European Central Bank just did something it hasn’t done in three years: raise interest rates. On June 11, the ECB unanimously voted to bump its key rates by 25 basis points, pushing the deposit facility rate to 2.25%, the main refinancing operations rate to 2.40%, and the marginal lending facility rate to 2.65%.
The numbers behind the optimism (and the caution)
Euro-area inflation is now expected to average 3.0% in 2026, revised upward from earlier estimates. That’s well above the ECB’s 2% target. The projections do forecast a gradual cooldown, with inflation expected to hit 2.3% in 2027 and finally reach the 2.0% target in 2028.
Growth, meanwhile, got a haircut. Real GDP in the euro zone is projected at just 0.8% for 2026, shaved down by 0.1 percentage points from the previous forecast. The longer-term trajectory looks slightly better, with 1.2% growth expected for 2027 and 1.5% for 2028.
ECB President Christine Lagarde noted that inflation pressures are “broadening throughout the economy.” She emphasized a cautious, meeting-by-meeting approach with no commitment to a predetermined rate path.
