The European Central Bank (ECB) raised its main deposit rate from 2% to 2.25% on June 6, 2026, the first increase since September 2023, according to the ECB's official statement. The decision was driven by heightened inflation risks stemming from the ongoing conflict in Iran, which has disrupted global energy markets and supply chains.
ECB President Christine Lagarde stated that the rate hike aims to 'prevent second-round effects from energy price shocks' and that future decisions will remain data-dependent. Financial markets are now pricing in two additional quarter-point increases by the end of 2026, as per Bloomberg data.
The conflict in Iran, which began in April 2026, has pushed oil prices above $120 per barrel, contributing to eurozone inflation rising to 3.8% in May 2026, up from 2.4% in March. The ECB's move aligns with similar tightening by the Federal Reserve, which raised rates by 25 basis points on June 4.
Economists warn that further rate increases could slow economic growth in the eurozone, which expanded by only 0.3% in the first quarter of 2026. The ECB's next policy meeting is scheduled for July 24, 2026.
