The European Central Bank’s Governing Council raised its three key interest rates by 25 basis points on Thursday. The deposit facility rate moves to 2.50%, the main refinancing rate to 2.65% and the marginal lending facility to 2.90%, effective 16 September 2026. The decision matched market expectations and was framed as a response to inflation that is projected to stay well above the 2% target for an extended period.
Updated staff projections show headline inflation averaging 3.0% in 2026, 2.5% in 2027 and 2.1% in 2028. Core inflation excluding energy and food is seen at 2.5% this year, 2.6% next year and 2.3% in 2028. Compared with the June forecasts, the 2026 headline path is unchanged while 2027 and 2028 estimates were revised higher. Growth is projected at 0.9% in 2026, 1.4% in 2027 and 1.5% in 2028.
President Christine Lagarde emphasized that the Middle East conflict continues to generate inflation pressures through energy prices. Euro-area inflation rose to 3.3% in August, with energy inflation accelerating to 14.3%. The Governing Council stressed it is not pre-committing to any particular rate path and will remain data-dependent.
The synchronized tightening signal from the ECB and rising U.S. wholesale inflation data reinforced global bond-market pressure. German Bund yields and U.S. Treasury yields both extended multiyear highs. European equity indexes traded mixed to lower, with rate-sensitive sectors underperforming. For U.S. investors the ECB move adds another layer of confirmation that major central banks remain focused on containing energy-driven price pressures rather than pivoting toward accommodation.