ECB Raises Key Interest Rates by 25 Basis Points and Upgrades Inflation Outlook
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The Governing Council of the European Central Bank announced on 10 September 2026 an increase of 25 basis points in all three key ECB interest rates, responding to persistent inflationary pressures stemming from the conflict in the Middle East. The ECB reaffirmed its commitment to ensuring that inflation stabilizes at the 2% medium term target, following a strictly data driven approach.
According to the updated projections of ECB staff, headline inflation is expected to average 3.0% in 2026, 2.5% in 2027, and 2.1% in 2028. Core inflation (excluding energy and food) is projected at 2.5%, 2.6%, and 2.3% respectively. Projections for 2027 and 2028 have been revised upward, reflecting secondary effects of the energy shock and heightened geopolitical uncertainty.
The ECB also revised upward its outlook for euro area economic growth, forecasting 0.9% in 2026, 1.4% in 2027, and 1.5% in 2028, highlighting the stronger than expected resilience of the eurozone economy despite external pressures.
Impact on Euro Area Businesses
The 25 basis point rate increase raises financing costs for businesses, particularly those operating in sectors with high working capital needs or significant investment expenditure. Higher borrowing costs are expected to constrain credit expansion, slow down new investments, and reinforce cautious liquidity management.
The upward revision of inflation projections for 2027 and 2028 indicates that companies will continue to operate in an environment of elevated input prices, placing pressure on profit margins and intensifying the need for strategic pricing and cost optimization.
However, the improved medium term growth outlook for 2027 and 2028 provides a more stable framework for business activity, with the resilience of the eurozone economy acting as a counterbalance to short term pressures.
Uncertainty remains elevated. Risks to inflation are tilted to the upside, while risks to growth remain on the downside. Updated energy scenarios reflect a wide range of potential outcomes depending on the intensity and duration of the shock, as well as its indirect and secondary effects on prices and economic activity.
With this decision, the ECB confirms that monetary policy will continue to be set meeting by meeting, without pre committing to any specific rate path. Decisions will be based on the inflation outlook, associated risks, underlying inflation dynamics, and the strength of monetary policy transmission.
Key ECB Interest Rates Effective 16 September 2026
• Deposit Facility: 2.50%
• Main Refinancing Operations: 2.65%
• Marginal Lending Facility: 2.90%
APP & PEPP
The APP and PEPP portfolios continue to decline at a measured and predictable pace, as the Eurosystem no longer reinvests principal payments from maturing securities.
