By Marta Vilar – BERLIN (Econostream) – The European Central Bank’s Governing Council on Thursday raised its key interest rates by 25bp, while updated staff projections showed higher headline and core inflation in the coming years alongside stronger economic growth.

The three ECB interest rates will rise to 2.50% for the deposit facility, at 2.65% for the main refinancing operations and at 2.90% for the marginal lending facility.

In its monetary policy statement, the Governing Council said that “[t]he conflict in the Middle East continues to generate inflation pressures, and inflation is set to remain well above target for an extended period.”

The ECB described the outlook as “highly uncertain”, with risks tilted to the upside for inflation and to the downside for growth.

In its latest projections, the ECB left its headline HICP inflation forecast for 2026 unchanged at 3.0%, but raised its projections for 2027 and 2028 to 2.5% and 2.1%, respectively.

Core inflation, excluding energy and food, was also left unchanged at 2.5% for 2026, while the forecasts for 2027 and 2028 were revised slightly higher to 2.6% and 2.3%, respectively.

At the same time, staff upgraded its near-term growth outlook, with euro area GDP now expected to expand by 0.9% in 2026 and 1.4% in 2027. The 2028 growth forecast was left unchanged at 1.5%.