The European Central Bank raised its deposit rate to 2.5% on 10 September, its second increase since June, because the energy shock from the Middle East conflict has pushed eurozone inflation to 3.3%.
The European Central Bank raised its three key interest rates by 25 basis points on 10 September 2026, taking the deposit facility rate to 2.50%, the main refinancing rate to 2.65% and the marginal lending rate to 2.90%, according to Euronews and CNBC. Euronews describes it as the second increase since June.
The reason was energy. Euro area inflation rose to 3.3% in August from 2.9% in July, with energy prices up 14.3% from a year earlier, according to Euronews. Core inflation, which excludes energy and food, fell to 2.4% and services inflation fell to 3.0%, which suggests that wage pressure is limited, and the report presents the shock as a supply shock and not a demand-driven one, unlike the inflation of 2021-22.
The ECB’s statement said that the conflict in the Middle East continues to generate inflation pressures and that inflation is set to remain well above target for an extended period, according to Euronews. The central bank’s target is 2%. The statement is the bank’s own wording as quoted by Euronews and the full text was not reviewed.
The updated staff projections show inflation of 3.0% in 2026, unchanged from the previous forecast, and higher figures for later years: 2.5% in 2027 and 2.1% in 2028, according to a search summary of the ECB’s projections. For inflation excluding energy and food, the baseline is 2.5% in 2026, 2.6% in 2027 and 2.3% in 2028. Euronews gives the 2027 and 2028 headline figures as revised upwards.
CNBC’s headline says that the ECB raised rates as policymakers see a risk of higher inflation and weaker growth, which is the difficulty facing the bank: higher energy prices push inflation up while reducing spending and output. The IMF’s October outlook, which Delima News has reported, sees euro area growth of 1.1% in 2026.
The next meeting is on 28 and 29 October, with a press conference on 29 October, according to a search summary of the ECB calendar. Market-based estimates cited by a prediction market summary imply that the bank will leave the deposit rate at 2.50% at that meeting and not extend September’s increase, but this is a market expectation and not a statement by the ECB.
Other central banks meet around the same time. The Bank of Japan has a rate decision on 28 October, when its benchmark rate is at 1.25%, according to a summary of Trading Economics, and the Bank of England’s next decision is on 5 November, as Delima News reports in a separate article.
The size of the move is small in itself. A rise of 25 basis points to a deposit rate of 2.50% means the rate was 2.25% before, which is a quarter of a percentage point, but inflation of 3.3% is 1.3 points above the 2% target,. Both figures are Delima News’ calculations from the published rates.
The ECB’s path will depend on how energy prices move. Brent crude was near $105 to $107 a barrel in mid-October, according to market reports, and the IMF assumes that shipments through the Strait of Hormuz resume by March.
Delima News will report the ECB’s decision on 29 October.
Image: The European Central Bank in Frankfurt (file photo). Photo: Norbert Nagel / Wikimedia Commons (CC BY-SA 4.0)
