After its governing council meeting on Thursday, the European Central Bank raised its deposit facility rate from 2% to 2.25%, marking the first interest rate increase in almost three years.
The deposit facility rate is the primary policy benchmark used by the European Central Bank (ECB) to determine monetary policy for the eurozone. Following a tightening cycle intended to stabilize post-pandemic inflation, the ECB’s deposit facility rate was last raised in September 2023, peaking at 4.0%.
Additionally, the ECB increased its marginal lending facility rate to 2.65% and its primary refinancing operations rate to 2.4%. With eurozone inflation reaching 3.2% in May its highest level since September 2023 driven by a 10.9% increase in energy prices, the raise in key interest rates clearly reverses the easing cycle that had characterized the ECB’s strategy throughout much of 2025. The governing council concluded that doing nothing was unacceptable.
Financial markets had almost certainly priced in a hike ahead of Thursday’s meeting as members of the ECB governing council hinted at a rate increase in June from both the hawkish and dovish ends of the spectrum.
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