ECB Raises Rates for First Time Since 2023

Summary

The ECB raised interest rates for the first time in almost three years, lifting the deposit rate to 2.25%. Inflation forecasts were revised higher, and core inflation is accelerating, making further tightening possible. However, one guest warned that a hike now would force the ECB to cut rates by Q4, highlighting a split outlook.

• ECB raises deposit rate by 25bp to 2.25%, first hike since 2023.
• 2026 inflation forecast revised up to 3% from 2.6%.
• Core inflation accelerated faster than headline in May.
• ECB emphasizes data-dependent, meeting-by-meeting approach, no commitment to a path.
• Guest Jeffrey argues that raising rates now will force cuts by Q4.
• ECB more focused on fighting inflation than supporting growth, given only a modest GDP forecast downgrade.