The increase was in line with market expectations, according to Bloomberg's compilation of forecasts.
The ECB does not want to commit to future increases. But they are not ruled out. According to the interest rate announcement, future interest rate decisions will be made based on incoming statistics before each meeting.
The market expects at least one more increase this year.
“The war creates inflationary pressures”
"The war in the Middle East is creating inflationary pressures, and the decision to raise interest rates is well-founded in a wide range of scenarios that describe how the shock could develop and affect the outlook," the central bank wrote in a press release.
ECB President Christine Lagarde believes that with today's decision, the central bank is well positioned to handle the uncertainty caused by the conflict involving Iran.
"The Council is committed to shaping monetary policy so that inflation is stabilized at the 2 percent target. In line with that commitment, the Council decided today to raise policy rates by 25 basis points," Lagarde said at a press conference.
Raises inflation forecast
At the same time, the ECB is raising its inflation forecast for this year and next. In 2026, ECB economists expect inflation to reach 3.0 percent. This compares with 2.6 percent in the latest forecast.
The inflation forecast is being raised with reference to higher energy prices, which ECB economists say are expected to push up the prices of food, goods and services in eurozone countries.
For 2027, the inflation forecast is raised to 2.3 percent, compared with 2.0 percent. The growth forecast for the eurozone countries is also adjusted, albeit downwards.
The inflation target is expected to be achieved in the second half of 2027, Lagarde said.
