European Central Bank hikes key policy rates by 25 bps for first time in nearly 3 years
Frankfurt, June 11
,: The European Central Bank hiked key interest rates for the first time in nearly three years, responding to inflation pressures emanating from the Middle East conflict.
The ECB raised all three key interest rates by 25 basis points taking the deposit facility to 2.25 per cent, refinancing rate to 2.4 per cent and marginal lending facility to 2.65 per cent. The bank also raised its inflation projections for 2026-27 owing to a higher path for energy prices which could feed into food, goods and services inflation, ECB said.
"In the baseline of the new Eurosystem staff projections, headline inflation is expected to average 3.0% in 2026, 2.3% in 2027 and 2.0% in 2028. For inflation excluding energy and food, the baseline foresees an average of 2.5% in 2026 and 2027 and 2.2% in 2028," the ECB said in a release.
The rate hike comes even as concerns around growth linger with rising prices posing a challenge for households. Inflation in the 21-country currency bloc is above 3 per cent, beyond the ECB's target of 2 per cent.
The economic growth projections have also been revised downwards for 2026 and 2027. The bank project economic growth at an average of 0.8 per cent in 2026 and 1.2 per cent in 2027 and 1.5 per cent in 2028. The central bank said that the revised outlook for growth reflects the impact of war on commodity markets, real incomes and confidence.
"The outlook remains uncertain, with upside risks for inflation and downside risks for economic growth. The full implications of the war for medium-term inflation and growth will depend on the intensity and duration of the energy price shock, as well as the scale of its indirect and second-round effects," ECB said.
The prolonged closure of the Strait of Hormuz has jolted the energy markets triggering inflation concerns globally. US consumer price index came in hot at 4.2 per cent on Wednesday raising worries for the newly-appointed US Federal Reserve chairman Kevin Warsh as he heads into his maiden policy meeting June 16-17.
— ANI
Reader Comments
The US Fed and ECB both raising rates shows how interconnected global economy is. Strait of Hormuz closure is a nightmare for oil importers like India too. Petrol prices already killing us. ECB says growth will be 0.8% in 2026... that's recession territory practically.
Interesting timing. ECB waits nearly 3 years and then hikes just 25 bps? In India, RBI has been more proactive. But we also have higher inflation. The real worry is energy prices feeding into everything else. Expect imported inflation to hit our markets too.
ECB projecting 3% inflation in 2026 is concerning. For India, this means rupee could face pressure if ECB keeps hiking. Our exports might get competitive but imports become costlier. The war is really messing up global supply chains, yaar.
One hike after years of low rates. ECB is behind the curve. But honestly, the root cause is geopolitical - Middle East tensions. No amount of rate hikes will fix supply disruptions. India should focus on diversifying energy sources. Solar, nuclear, anything.
ECB revising inflation higher for 2026-27 shows they expect prolonged energy price impact. For middle class in India, this means higher EMIs if RBI follows suit. Already our home loan rates are painful. 🌍 Global economy is really struggling.
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