The European Central Bank (ECB) raised its deposit rate by 0.25 percentage point to 2.5% on Thursday, September 10, seeking to contain renewed inflationary pressure driven mainly by higher energy costs. It was the second interest-rate increase of 2026.
The decision followed eurozone inflation reaching 3.3% in August, moving further away from the institution’s 2% target. More expensive oil and gas, amid the conflict in the Middle East and uncertainty over supplies, have placed greater pressure on European consumers and businesses.
More expensive credit to curb inflation
By raising rates, the ECB makes borrowing more expensive and seeks to reduce part of the demand in the economy. The measure may limit the spread of energy costs into other prices, but it also increases financing costs for households, companies and governments.
According to Reuters and the Associated Press, the refinancing rate rose to 2.65%, while the marginal lending facility rate increased to 2.9%. The new levels take effect on September 16.
Forecasts revised
The ECB now projects average inflation of 3% in 2026, 2.5% in 2027 and 2.1% in 2028. Despite the pressure on prices, its eurozone growth forecast for this year was raised to 0.9%, indicating that economic activity has been more resilient than expected.
ECB President Christine Lagarde stressed the uncertainty surrounding the outlook and indicated that future decisions would be taken meeting by meeting based on incoming data. Thursday’s increase therefore does not, by itself, establish an automatic path of further hikes.
Energy remains at the center of the risks
Europe’s dependence on imported energy leaves the region vulnerable to supply disruptions and fluctuations in oil and gas prices. With winter approaching in the Northern Hemisphere, inventories and energy costs will remain among the central bank’s main concerns.
Markets and European governments will monitor the effects of the decision. The ECB’s challenge is to curb inflation without causing an excessive slowdown in an economy that is still growing at a moderate pace.
Sources: Reuters and the Associated Press.
