European Central Bank officials consider second interest rate hike as inflation tops 3%

Just months ago, the European Central Bank was in easing mode. Now it’s preparing to raise rates for the second time, with policymakers actively discussing another 25 basis point increase at their next meeting.

The ECB’s deposit facility rate currently sits at 2.00% after the bank held steady at its April 30 meeting. A hike on June 11 would push it to 2.25%, and a growing consensus suggests September could bring yet another increase. More than 90% of economists surveyed expect the June move, and futures markets have priced in approximately 99% odds of it happening.

From rate cuts to rate hikes in record time

Throughout 2025, the ECB was cutting rates, reducing the deposit facility rate to 2.00% by June 2025 as inflationary pressures eased. The expectation heading into 2026 was continued easing.

Then energy prices happened.

The Iran conflict has sent energy costs surging across Europe, reigniting inflationary pressures that policymakers thought they had tamed. Euro area inflation has reaccelerated above 3% as of May 2026, blowing past the ECB’s 2% target and forcing a complete U-turn in monetary policy thinking.

A Bloomberg survey conducted in early May showed economists shifting their expectations toward two quarter-point hikes in 2026. The reasoning centers on what economists call “secondary inflation effects” — high energy prices bleeding into food, services, and wages. The ECB has described its approach as “data-driven,” with no full policy path pre-committed beyond the next meeting.

What two rate hikes mean for markets

Higher rates in Europe mean higher borrowing costs for businesses and consumers across the 20-nation bloc. For crypto specifically, digital assets have broadly benefited from accommodative monetary policy environments. A tightening ECB creates the opposite dynamic, where capital gets more expensive, risk tolerance shrinks, and speculative assets tend to feel the squeeze first.

The Iran factor and what investors should watch

The wildcard in all of this remains energy prices, and by extension, the Iran conflict. Energy costs are the primary driver behind the inflation resurgence.

The June 11 meeting is the immediate catalyst. If the ECB hikes as expected and signals hawkish intent for September, expect bond yields across Europe to climb and risk assets to face selling pressure in the days following the announcement.

Monthly inflation readings between now and September will be critical. If headline inflation remains above 3% or accelerates further, the case for a second hike becomes ironclad. The consensus forecast of two hikes this year assumes no resolution to the Iran conflict and continued energy price pressure. Any diplomatic breakthrough that eases energy markets could dramatically alter the ECB’s calculus.

Disclosure: This article was edited by Editorial Team. For more information on how we create and review content, see our Editorial Policy.