- Decision
- Raise
- Rate change
- 25 bps
- deposit facility rate
- 2.5%
The European Central Bank (ECB) Governing Council raised its three key interest rates by 25 basis points, citing inflation pressures from the Middle East conflict and expectations that inflation will remain well above its 2% target for an extended period. The deposit facility rate had been held at 2.00% from September 2025 through April 2026, raised by 25 basis points in June and held in July. Effective 16 September, the deposit facility, main refinancing operations and marginal lending facility rates will rise to 2.50%, 2.65% and 2.90%, respectively, while the asset purchase programme and pandemic emergency purchase programme portfolios will continue declining without reinvestments. ECB staff projected headline inflation at 3.0% in 2026 and 2.1% in 2028, with the 2027 and 2028 forecasts revised higher, while growth is seen at 0.9% in 2026 and 1.5% in 2028 amid greater-than-expected economic resilience. The outlook remains highly uncertain, with upside inflation risks and downside growth risks linked to the energy shockâs intensity, duration and second-round effects. The Governing Council will retain a data-dependent, meeting-by-meeting approach without pre-committing to a rate path and stands ready to adjust all instruments to stabilise inflation and preserve policy transmission.
Rate evolution
From June 2025 to April 2026, the European Central Bank cut the deposit facility rate by 25 basis points to 2.00% in June and then held it unchanged, with the easing based on a better inflation outlook, moderating underlying inflation and wage growth, and effective monetary transmission, as inflation was around target and worries that trade tensions would tighten financing conditions had eased. Later holds reflected inflation staying at or near 2%, easing domestic price pressures and labour costs, anchored longer-term inflation expectations, and an economy that remained resilient thanks to the labour market, solid private sector balance sheets, easier financing conditions and, by December, stronger domestic demand, even as trade disputes, geopolitics and the stronger euro kept uncertainty elevated.
In subsequent decisions, the Governing Council again left rates unchanged but warned that the war in the Middle East had sharply raised energy prices, intensifying upside risks to inflation and downside risks to growth, before raising the three key ECB interest rates by 25 basis points on 11 June 2026, lifting the deposit facility rate to 2.25% as it judged that the war was generating inflation pressures. On 23 July 2026, it held the deposit facility rate at 2.25% and said energy prices remained highly volatile and well above pre-conflict levels, uncertainty was high and the full inflationary impact of the shock had yet to play out, while reiterating its data-dependent, meeting-by-meeting approach with no pre-committed rate path. On 10 September 2026, the Governing Council raised the three key ECB interest rates by a further 25 basis points, taking the deposit facility rate to 2.50% with effect from 16 September, as the conflict continued to generate inflation pressures and inflation was set to remain well above target for an extended period. New European Central Bank staff projections put headline inflation at 3.0% in 2026, 2.5% in 2027 and 2.1% in 2028, with the 2027 and 2028 forecasts revised up from June, while the Governing Council said risks remained tilted to the upside for inflation and to the downside for growth and retained its data-dependent, meeting-by-meeting approach.