The European Central Bank (ECB) decided at its meeting earlier today, Thursday, June 11, to raise interest rates by 25 basis points, as expected, to 2.40%. This follows seven meetings where the rate was held steady at 2.15%. The ECB also lowered the deposit rate to 2.25% and the lending facility rate to 2.65%.

In its policy statement, the ECB stated that the Governing Council remains committed to a monetary policy that will ensure inflation remains at its 2% target over the medium term. The statement noted that the war in the Middle East is contributing to inflationary pressures, and that the ECB’s decision today is based on a careful analysis of a range of scenarios that determine how this shock might develop and its impact on the ECB’s medium-term outlook for the Eurozone.

In the ECB’s new baseline scenario, headline inflation is expected to average 3% in 2026 and 2.3% next year. Core inflation, excluding food and energy prices, is projected to reach 2.5% this year and next, with the bank raising its inflation forecast due to higher energy prices.

The bank also anticipates moderate economic growth of 0.8% this year and 1.2% next year, a downward revision from its March forecast, reflecting the impact of the trade war on commodity markets.

The Governing Council is committed to ensuring inflation remains within its 2% target over the medium term and will adopt a data-driven approach, making decisions at each meeting to determine the appropriate monetary policy.

The Appropriations Purchase Programme (APP) and the Pandemic Emergency Purchase Programme (PEPP) are being phased out at a measured and expected pace, as the Eurosystem has ceased reinvesting capital payments from maturing securities.

Markets are awaiting the ECB President’s comments and question-and-answer session at the press conference, scheduled for approximately 45 minutes from now.