REVIEW: ECB Begins Its Rates Adjustment, To Anchor Inflation Expectations

In this paper, we discuss:

• The ECB’s decision to raise interest rates by 25bps in response to rising inflation risks;
• How the Iran conflict is creating a difficult trade-off between higher inflation and weaker economic growth;
• Why policymakers fear repeating the inflation misjudgements of 2021-22 while avoiding the tightening mistake of 2011;
• How the ECB has revised inflation forecasts higher and growth forecasts lower amid persistent energy price pressures;
• Why markets increasingly expect further rate hikes despite growing recession and stagflation risks.

Download PDF: ECB Review – June 2026