European Central Bank (ECB) investor relations material

Monetary policy decision and rationale

• Interest rates raised by 25 basis points, unanimously agreed, with no alternative options discussed, due to inflation pressures from the Middle East conflict.

• New rates: deposit facility at 2.25%, main refinancing at 2.40%, marginal lending at 2.65% effective 17 June 2026.

• Decision based on persistent inflation pressures, especially from energy, and robust across baseline, adverse, severe, and milder scenarios.

• No pre-commitment to a preset rate path; future decisions will be data-dependent and made meeting-by-meeting.

• The move is not considered an insurance or credibility hike, but a necessary monetary policy response to inflation outlook.

Inflation and economic outlook

• Headline inflation projected at 3% in 2026, 2.3% in 2027, and 2% in 2028; core inflation at 2.5% in 2026/2027, 2.2% in 2028.

• Inflation projections revised up for 2026/2027 due to higher energy prices, with indirect effects on food, goods, and services.

• Economic growth forecast at 0.8% in 2026, 1.2% in 2027, and 1.5% in 2028, revised down due to war impacts.

• Inflation expected to remain above target into 2027, returning to 2% in the second half of 2027.

• Upside risks for inflation and downside risks for growth persist, mainly due to geopolitical tensions and energy shocks.

Risk assessment and scenario analysis

• War in the Middle East and other geopolitical tensions are major sources of uncertainty for inflation and growth.

• Prolonged energy disruptions could further raise inflation and erode real incomes, dampening investment and consumption.

• Scenarios updated to include adverse, severe, and milder cases; decision robust across all.

• Second-round effects from wages not yet evident but are being closely monitored.

• Extreme weather and climate crisis could drive food prices higher than expected.