ECB Raises Interest Rates Amid Ongoing Inflation Concerns

The European Central Bank (ECB) has raised its three key interest rates by 25 basis points, in an effort to combat inflation that is expected to remain above target for an extended period. The decision was announced by ECB President Christine Lagarde and Vice-President Boris Vujčić at a press conference in Berlin.

The baseline projection of the ECB's staff sees headline inflation averaging 3.0 per cent in 2026, 2.5 per cent in 2027, and 2.1 per cent in 2028, while excluding energy and food, it foresees 2.5 per cent in 2026, 2.6 per cent in 2027, and 2.3 per cent in 2028.

The ECB also upgraded its economic growth forecast, predicting 0.9 per cent for 2026, 1.4 per cent for 2027, and 1.5 per cent for 2028. However, the outlook remains highly uncertain, with risks to the upside for inflation and to the downside for economic growth.

The energy shock continues to weigh on the economy, but the ECB is confident that its interest rate decisions will be effective in stabilizing inflation around the target of two per cent in the medium term.