The European Central Bank lifted its deposit facility rate by 25 basis points to 2.25% on June 11-its first hike since 2023-after eurozone inflation reached 3.2% in May, the highest since September 2023.
Energy prices, driven by Middle East disruptions to Strait of Hormuz shipping, pushed energy inflation to roughly 10.8%. ECB staff projected oil at $112 per barrel in Q2, but Brent crude dropped about 6.6% during the week of June 8-12.
Updated ECB projections: headline inflation 3.0% in 2026, declining to 2.3% in 2027 and 2.0% in 2028. Growth forecast revised down to 0.8% for 2026. The main refinancing rate was set at 2.40% and the marginal lending facility at 2.65%, effective June 17.
The rate hike, reversing a long easing cycle that brought the deposit rate to 2.0% by early 2026, reflects concerns over second-round effects from higher wages.
For investors, higher rates add volatility to bonds and bank stocks. In crypto, rising deposit yields increase the opportunity cost of holding non-yielding assets like Bitcoin and Ethereum. Euro-denominated stablecoins and DeFi pools could face capital outflows. The sluggish growth outlook may further dampen retail risk appetite.