European Central Bank (ECB) Monetary Policy Decision summary

Monetary policy decisions and outlook

• Key interest rates were lowered by 25 basis points, effective 11 June 2025, with the deposit facility at 2.00%, main refinancing at 2.15%, and marginal lending at 2.40%.

• Headline inflation is projected at 2% in 2025, 1.6% in 2026, and 2% in 2027, with core inflation stabilizing near target.

• Real GDP growth is forecast at 0.9% in 2025, 1.1% in 2026, and 1.3% in 2027, supported by government investment and resilient household spending.

• The decision was nearly unanimous, with only one dissenting member.

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

Economic environment and risks

• The euro area economy showed resilience in Q1 2025, with 0.3% growth and record-low unemployment at 6.2%.

• Uncertainty from global trade tensions and geopolitical events remains high, impacting investment and exports.

• Rising government investment in defense and infrastructure is expected to support medium-term growth.

• Downside risks to growth include further trade tensions, financial market volatility, and geopolitical conflicts.

• Alternative scenarios suggest growth and inflation could deviate from baseline if trade tensions escalate or ease.

Inflation dynamics and expectations

• Annual inflation fell to 1.9% in May, with energy prices negative and food inflation slightly up.

• Wage growth is moderating, with projections for negotiated wage growth to fall below 3% by 2026-2027.

• Most measures of underlying and long-term inflation expectations remain anchored around 2%.

• Short-term inflation expectations edged up in April, likely due to trade tensions.

• Inflation is expected to return to target by 2027, with energy prices and euro strength as key factors.