FRANKFURT, GERMANY / EuroWire / – The European Central Bank raised interest rates on Thursday for the first time since 2023. The Governing Council increased all three key ECB rates by 25 basis points. The deposit facility rate rises to 2.25%. The main refinancing rate rises to 2.40%. The marginal lending facility rate rises to 2.65%. The new rates take effect on June 17, 2026, after the June 11 monetary policy meeting in Frankfurt.
The move reverses part of the easing that followed the 2023 tightening cycle. ECB rate records show the last increase took effect on September 20, 2023. At that time, the deposit rate reached 4.00%. The central bank later cut rates in 2024 and 2025 as inflation eased. The new decision places eurozone interest rates back on an upward path for the first time in nearly three years.
The European Central Bank linked the increase to renewed inflation pressure from the war in the Middle East. The Governing Council said it remains committed to returning inflation to its 2% target in the medium term. New Eurosystem staff projections put headline inflation at 3.0% in 2026. They see inflation at 2.3% in 2027 and 2.0% in 2028.
Rates rise as inflation forecasts increase
The projections also show price pressure beyond energy and food. Inflation excluding those items averages 2.5% in both 2026 and 2027. It reaches 2.2% in 2028. Staff raised the inflation outlook for 2026 and 2027 from March levels. They cited a higher energy price path and wider effects on food, goods, and services.
The growth outlook moved lower for the next two years. Eurosystem staff now see eurozone economic growth at 0.8% in 2026. They project growth of 1.2% in 2027 and 1.5% in 2028. The ECB said the downgrade reflects the stronger impact of the war on commodity markets, real incomes, and confidence. The figures frame the rate decision against slower economic activity.
ECB maintains data based policy approach
The Governing Council said it will base interest rate decisions on economic and financial data. It cited the inflation outlook, inflation risks, underlying inflation, and monetary policy transmission. It also said it has not committed to a set rate path. The Asset Purchase Programme and the pandemic emergency purchase programme continue to shrink as maturing securities roll off. The Eurosystem no longer reinvests those principal payments.
The ECB rate hike affects a currency area that shares one central bank and one monetary policy. The deposit rate serves as the main guide for the policy stance. The main refinancing rate applies to regular bank borrowing operations. The marginal lending rate covers overnight credit to banks. Together, the three rates define the central bank’s key interest rate corridor for eurozone monetary policy.