ECB Hikes All Three Key Rates 25bp — Deposit Rate to 2.25%, First Increase Since July 2023

The ECB Governing Council raised all three key rates by 25bp: the deposit facility rate to 2.25%, the main refinancing rate to 2.40%, and the marginal lending rate to 2.65%, effective June 17. This is the first ECB hike since July 2023 and formally reverses the final step of the 8-cut easing cycle that ran from June 2024 to June 2025. The move was priced at 99% probability by markets heading into the meeting. New ECB staff macroeconomic projections: headline HICP inflation revised to 3.0% for 2026, 2.3% for 2027, and 2.0% for 2028 (returning to target only in the final projection year); Eurozone GDP growth cut to 0.8% (2026), 1.2% (2027), 1.5% (2028). President Lagarde cited Iran-war-driven energy inflation as the primary driver, and left the door open to further tightening depending on incoming data — markets read this as signaling at least one more hike is possible before year-end.