ECB Raises Interest Rates 25 Basis Points Amid Middle East War
The European Central Bank increased its key interest rates by a quarter point on June 11, bringing the deposit rate to 2.25%. The move responds to inflation pressures from the Middle East conflict affecting energy prices.
The European Central Bank's Governing Council decided on June 11 to raise the three key ECB interest rates by 25 basis points, effective June 17. The deposit facility rate now stands at 2.25%, the main refinancing operations rate at 2.40%, and the marginal lending facility at 2.65%.
War-Driven Inflation Concerns
The war in the Middle East is generating inflation pressures, and the decision to raise rates is robust across a range of scenarios mapping out how the shock might evolve. In the baseline projections, headline inflation is expected to average 3.0% in 2026, 2.3% in 2027 and 2.0% in 2028, while core inflation is forecast at 2.5% in 2026 and 2027. Staff have revised up their baseline projection for inflation in 2026 and 2027 owing to a higher path for energy prices.
Economic growth is projected at 0.8% in 2026, 1.2% in 2027 and 1.5% in 2028, a downward revision reflecting a more pronounced impact of the war on commodity markets, real incomes and confidence.
Impact on Mortgages and Savings
For expats and residents in Germany, this rate hike has direct consequences. If you're considering a mortgage or refinancing, borrowing costs will edge higher as banks pass through the ECB's policy shift. Variable-rate mortgages will see monthly payments rise within weeks. On the flip side, savers will finally see slightly better returns on deposit accounts—though real returns remain modest given current inflation. If you're sending money abroad or dealing with currency conversions, watch the euro closely; rate differentials with other central banks can shift exchange rates quickly.
Sources
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