The European Central Bank increased its three key interest rates by 25 basis points on September 10, lifting the deposit facility rate to 2.50% effective September 16. The main refinancing operations rate rose to 2.65% and the marginal lending facility rate to 2.90%, as the Governing Council moved to counter inflationary pressures stemming from continued conflict in the Middle East.
The ECB cautioned that inflation will remain well above its 2% medium-term target for an extended period, driven in large part by energy price disruptions linked to the ongoing war in Iran. Staff projections released alongside the decision show headline inflation at 3.0% in 2026, 2.5% in 2027 and 2.1% in 2028. The 2026 figure was unchanged from the June outlook, while projections for both 2027 and 2028 were revised upward. Inflation excluding energy and food is projected at 2.5% this year, 2.6% in 2027 and 2.3% in 2028.
Economic growth forecasts were also adjusted higher. The euro area economy is now expected to expand 0.9% in 2026, up from prior estimates, with growth of 1.4% in 2027 and 1.5% in 2028 — reflecting greater-than-expected resilience in the region. Nevertheless, the ECB stressed that the outlook remains highly uncertain, with upside risks to inflation and downside risks to growth. Updated staff scenarios incorporated a range of assumptions about the intensity and duration of the energy shock, as well as indirect and second-round effects.
The Governing Council reiterated a data-dependent, meeting-by-meeting approach, explicitly ruling out pre-commitment to any particular future rate path. On the balance-sheet front, portfolios under the Asset Purchase Programme and Pandemic Emergency Purchase Programme are declining at a measured pace as the Eurosystem no longer reinvests principal payments from maturing securities. The Transmission Protection Instrument remains available to address unwarranted, disorderly market dynamics that could threaten monetary policy transmission across euro area member states.
A press conference was scheduled for 14:45 CET on September 10.
