ECB chief economist Philip Lane told a Natixis conference in Paris that defending the recent rate hike was straightforward. He argued that with inflation still above target and the euro‑zone economy holding up, the central bank could not justify staying at the 2% deposit rate. The policy move raised the deposit rate by a quarter‑point to 2.25% in June, as part of its tightening cycle.

Lane noted that despite the Middle East conflict pushing oil prices higher, the euro‑zone’s financial system remains resilient, allowing tighter policy without sparking a credit crunch. He warned that cost pressures will keep headline inflation above 3% for the balance of the year, implying the ECB may have room to tighten further. The “neutral” rate, he said, now sits near 2.5% this quarter for now.

Markets have trimmed expectations for additional hikes this year but still price a single move in 2026, reflecting uncertainty around the ECB’s path. Analysts compare the decision with peers that have held rates steady, noting the divergence could affect euro‑denominated funding costs. The latest hike confirms the bank’s willingness to act when inflation threatens its mandate, signaling tighter credit in the near term.