The ECB raised all three key interest rates by 25 basis points, lifting the deposit facility to 2.25%, refinancing rate to 2.40%, and marginal lending facility to 2.65%. The central bank cited renewed inflation pressures, including energy costs linked to Middle East tensions, and raised its 2026–2027 inflation projections. Policymakers stressed a data-dependent, meeting-by-meeting approach, with uncertainty around both inflation risks and economic growth outlook.
The ECB’s June projections showed a significant upward revision for both CPI and core inflation compared with the March estimates. For 2026, the ECB raised its CPI forecast to 3.0% (from 2.6% in March) and core inflation to 2.5% (from 2.3%)—energy prices driven up by the conflict in the Middle East remain the main culprit. For the 2027–2028 horizon, the central bank continues to assume a gradual return of inflation to near the 2% target, though the June projections indicate that the disinflation path is bumpier than expected just a quarter ago. It is worth noting that the core CPI for 2028 has been lowered to 2.2% (from the 2.5% forecast in June for 2026), suggesting that the ECB still expects a significant easing of price pressures in the medium term. Nevertheless, today’s 25-basis-point rate hike—the first in years—clearly signals that the Governing Council takes the risk of entrenched inflation seriously and does not intend to wait for the energy shock to fade on its own
The President of the ECB will comment on the considerations underlying these decisions at a press conference starting at 14:45 CET today.
EUR/USD drops post-ECB — a classic "buy the rumour, sell the fact" reaction. The rate hike was fully priced in by markets, leaving little room for a hawkish surprise, which triggered profit-taking on long EUR positions. At the same time, risk sentiment took a sharp hit after President Trump posted a blunt warning that the US will "strongly attack Iran today," escalating geopolitical tensions and driving a fresh wave of safe-haven flows into the dollar.
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