The European Central Bank raised rates to 2.5%: what are the inflation forecasts?
The European Central Bank has raised all three key interest rates by 25 basis points. The deposit rate is now 2.5%, the second rate hike by the ECB in 2026.
This was reported by the ECB press service.
The Central Bank explained the change in monetary policy by inflation risks. In particular, prices continue to be affected by the conflict in the Middle East, which is why inflation, according to the ECB, will be significantly higher than the target for some time.
The bank emphasized that the decision should ensure that inflation returns to the target level of 2% in the medium term.
The new baseline forecast of ECB experts predicts that the average level of headline inflation will be:
-
- 3% in 2026;
-
- 2.5% in 2027;
-
- 2.1% in 2028.
Excluding energy and food prices, the forecast is 2.5% in 2026, 2.6% in 2027, and 2.3% in 2028.
Compared to the June estimates, the inflation forecast for 2026 has not changed. At the same time, the ECB has raised its inflation expectations for 2027 and 2028.
The central bank also revised its economic growth forecast for the eurozone. Growth is expected to be 0.9% in 2026, 1.4% in 2027, and 1.5% in 2028.
The ECB explained that the forecast for 2026 and 2027 was raised primarily due to the more resilient than expected eurozone economy.
At the same time, the bank stressed that the economic outlook remains highly uncertain. Among the risks are further acceleration of inflation and slowdown in economic growth.