ECB Raises Interest Rates for First Time in Three Years
The European Central Bank lifted its deposit rate from 2% to 2.25% on June 11th, ending a two-year easing cycle. Higher borrowing costs for mortgages and consumer loans will hit households already squeezed by energy price inflation.
The European Central Bank's governing council raised its three key interest rates by 25 basis points on June 11th, bringing the deposit facility rate to 2.25%, the main refinancing operations rate to 2.40%, and the marginal lending facility rate to 2.65%, with the changes taking effect from June 17th.
Why the reversal?
The ECB cited inflation pressures from the Middle East war, noting that the decision to raise rates is robust across scenarios mapping how the conflict might affect the euro area medium-term outlook. Eurozone inflation rose to 3.2% in May—the highest level since 2023—while core inflation climbed from 2.2% in April to 2.5%, showing price pressures extend beyond energy alone. This is the ECB's first rate increase since 2023, reversing a year-long easing cycle that brought rates down from their September 2023 peak of 4.0%.
The ECB's baseline projection expects headline inflation to average 3.0% in 2026, 2.3% in 2027, and 2.0% in 2028. Markets are pricing in roughly a 50% probability of another hike in September, suggesting this move may open a new tightening phase rather than a one-off intervention.
What it means for you
For households and businesses across the eurozone, the decision translates into higher borrowing costs on mortgages and corporate loans, at a time when purchasing power is already being squeezed by elevated fuel and gas prices. If you're planning to buy property or refinance, expect mortgage rates—which averaged 3.72% for new housing loans in March 2026—to edge higher. Variable-rate loans and any new consumer credit will also become more expensive in the coming months.
Sources
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