ECB Board Decisions and Future Outlook

Published 15.06.2026.

Updated 15.06.2026.

Articles

Uncertainty remains high. Contrary to previous expectations, the conflict in the Middle East continues, and supply chains still face disruptions. Oil prices remain high and may stay at an elevated level for longer. Inflationary pressure has become broader: euro area total inflation rose to 3.2% in May (3.0% in April), while core inflation rose to 2.5% (from 2.2%). Goods price inflation increased slightly to 0.9% (previously 0.8%), while services price inflation reached 3.5% (previously 3.0%). Significant secondary effects are not yet visible, and medium- and long-term inflation expectations remain stable. Short-term inflation expectations have increased significantly since the start of the conflict, and companies report increasing price pressure, which is likely to cause further short-term price increases.

To limit the further spread of inflationary pressure and reduce the risk of secondary effects, the ECB Board unanimously decided last Thursday to raise the main interest rates by 25 basis points. Such a gradual increase is appropriate and justified under various possible development scenarios – both if risks materialize in an upward direction and if they materialize downward relative to the baseline scenario. Oil price dynamics have been slow recently, and monetary policy transmission remains good, so interest rates can be adjusted gradually. With this decision, the ECB Board retains good opportunities to react to further developments if necessary to limit inflationary pressure and ensure inflation returns to the 2% target level in the medium term.

The updated total inflation forecast for 2026 has been raised to 3.0% (the forecast published in March was 2.6%), for 2027 to 2.3% (previously 2.0%), and for 2028 it remains at 2.0% (previously 2.1%). The core inflation forecast is currently 2.5% for 2026 (previously 2.3%), 2.5% for 2027 (previously 2.2%), and 2.2% for 2028 (previously 2.1%). In contrast, the growth forecast has been revised and set at 0.8% for 2026 (previously 0.9%), 1.2% for 2027 (previously 1.3%), and 1.5% for 2028 (previously 1.4%). Compared to inflation forecasts, the corrections to growth forecasts are small, as most corrections were already made in the March forecasts. The current forecast does not include the revised Q1 2026 GDP data published after the forecast preparation deadline, which showed a decline of 0.2% compared to the previous month. However, this data would not have affected the monetary policy decision, as the revision of growth forecasts is mainly related to Ireland. Excluding Ireland, the euro area economy grew by 0.3%, and the relevant changes largely relate to accounting rather than underlying economic dynamics.

The prolonged conflict in the Middle East and long-standing supply disruptions mean a faster depletion of oil reserves, and their replenishment will likely take longer. This means that oil prices may remain high for longer. Although labor supply conditions are improving slightly, they remain relatively limited. This situation may contribute to more persistent inflation, increase the risk of further secondary effects, and create non-linearity. Moreover, the energy price shock is global, so it may also affect import prices. Therefore, inflation risks remain upside. In the context of high uncertainty and rising inflation expectations, growth risks remain downside.

Given the high uncertainty, it is prudent to maintain the previous reaction function and mode of operation, namely to make data-dependent decisions at each meeting separately, without pre-determining the direction of interest rates. Full decision-making takes place at each meeting, preserving full flexibility to ensure the timely return of inflation to the 2% target level.