ECB Raises Interest Rates, Warns of Higher Inflation Ahead

The European Central Bank (ECB) has revised its inflation forecasts for 2027, predicting a higher rate of 2.5% due to rising energy prices stemming from the war in the Middle East.

This marks an increase from the previously forecasted 2.3%, and comes as the ECB raises interest rates for the second time this year to curb demand and limit companies' ability to raise their prices.

The main deposit rate was increased by a quarter of a percentage point to 2.5%, its highest level since March 2025, following an off-site monetary policy meeting in Berlin.

The ECB expects inflationary pressures to persist into 2027, driven by rising energy prices, and warns that the outlook remains uncertain and involves upside risks to inflation and downside risks to economic growth.