European Central Bank hikes interest rates to 2.5% as policymakers see risk of higher inflation, weaker growth

Christine Lagarde, president of the European Central Bank (ECB), during a rates decision news conference in Frankfurt, Germany, on Thursday, June 11, 2026. Alex Kraus | Bloomberg | Getty ImagesThe European Central Bank has voted to raise its key deposit rate by 25 basis points to 2.5% from 2.25% in a move widely expected by investors. But uncertainty around the U.S.-Iran war continues to cloud the outlook for the ECB's longer-term policy path, market watchers say, and investors will be watching closely for signals in policymakers' remarks later on Thursday. The ECB expects baseline inflation, excluding energy and food, to reach 2.5% in 2026, 2.6% in 2027 and 2.3% in 2028."The outlook remains highly uncertain, with risks to the upside for inflation and to the downside for economic growth," the ECB's Governing Council said, acknowledging a "broad range of outcomes" around growth and inflation as a result of the energy shock, including duration and second-round effects.Markets priced in a 100% chance of the 25 basis points hike ahead of Thursday's meeting, according to LSEG data. ECB officials have said since the U.S.-Iran war broke out that they would take a meeting-by-meeting approa...