By Marta Vilar – FRANKFURT (Econostream) – The European Central Bank’s Governing Council on Thursday raised its key interest rates by 25bp and published updated staff projections pointing to weaker growth and higher inflation over the coming years.

The three ECB interest rates will rise to 2.25% for the deposit facility, at 2.40% for the main refinancing operations and at 2.65% for the marginal lending facility.

In a statement, the Governing Council said that “[t]he war in the Middle East is generating inflation pressures, and the decision to raise rates is robust across a range of scenarios mapping out how the shock might evolve and affect the medium-term outlook for the euro area.”

The ECB said that the outlook was still uncertain, with risks on the upside for inflation and the downside for growth.

In its latest projections, the ECB revised its headline HICP inflation outlook higher for 2026 and 2027, now expecting inflation to average 3.0% and 2.3%, respectively, while lowering its 2028 forecast to 2.0%.

Core inflation, excluding energy and food, is projected at 2.5% in both 2026 and 2027, while the forecast for 2028 has been revised slightly higher to 2.2%.

At the same time, growth projections were downgraded for the earlier years, with euro area GDP now expected to expand by 0.8% in 2026 and 1.2% in 2027, while the 2028 forecast raised to 1.5%.