ECB STATEMENT: Rates hiked by 25bps; deposit facility to 2.25%, main refinancing operations to 2.40%, marginal lending facility to 2.65%

GUIDANCE:

• ECB not pre-committing to a particular rate path
• ECB to follow a data-dependent, meeting-by-meeting approach
• Rate decisions to be based on inflation outlook, underlying inflation dynamics and strength of monetary policy transmission
• Decision to raise rates judged robust across a range of scenarios for how the war shock might evolve
• ECB says it remains well positioned to navigate uncertainty caused by the war
• APP and PEPP portfolios declining at a measured and predictable pace, with no reinvestment of maturing securities
• Transmission Protection Instrument remains available to counter disorderly market dynamics
• ECB stands ready to adjust all instruments within its mandate

INFLATION:

• War in the Middle East generating inflation pressures
• Upside risks to inflation outlook
• Baseline inflation revised up for 2026 and 2027 owing to a higher energy price path
• Higher energy prices expected to feed into food, goods and services inflation

ECONOMY:

• Downside risks to economic growth
• Growth baseline revised down for 2026 and 2027
• Revision reflects more pronounced war impact on commodity markets, real incomes and confidence
• Outlook remains uncertain

FORECASTS:

• Headline inflation seen averaging 3.0% in 2026, 2.3% in 2027 and 2.0% in 2028
• Inflation excluding energy and food seen at 2.5% in 2026 and 2027 and 2.2% in 2028
• GDP growth seen at 0.8% in 2026, 1.2% in 2027 and 1.5% in 2028