European Central Bank increases interest rates by 25 basis points

On Thursday, September 10, 2026, the European Central Bank (ECB) raised its three key interest rates by 25 basis points. This move, which marks the second increase since June 2026, brings the deposit facility rate to 2.5 percent, while the main refinancing operations and marginal lending facility rates were adjusted to 2.65 percent and 2.9 percent, respectively. The decision was driven by persistent inflationary pressures caused by high energy costs linked to the ongoing conflict in the Middle East.

The ECB projects headline inflation will average 3.0 percent in 2026, 2.5 percent in 2027, and 2.1 percent in 2028. While the 2026 forecast remains unchanged from June projections, estimates for 2027 and 2028 were revised upwards. Conversely, economic growth forecasts for the euro area were improved to 0.9 percent for 2026, 1.4 percent for 2027, and 1.5 percent for 2028, reflecting stronger-than-expected economic resilience. Policymakers warned that inflation is expected to remain above the 2 percent target for an extended period.

The central bank has opted for a meeting-by-meeting approach regarding future monetary policy, providing little guidance on potential further hikes. The outlook remains characterized by significant uncertainty, with risks to inflation noted as upward and risks to growth noted as downward.