ECB hikes interest rates, sees inflation staying 'well above target'
By Benjamin Chiou
Date: Thursday 10 Sep 2026
(Sharecast News) - The European Central Bank raised its key interest rate by 25 basis points on Thursday as a result of price pressures triggered by the Middle East conflict, predicting that inflation will remain "well above target" for an extended period.
As widely expected by financial markets, the ECB's Governing Council voted to raise all three of its interest rates by the same amount, taking the key main refinancing operations (MRO) rate to 2.65%, and the deposit facility and marginal lending facility to 2.50% and 2.90%, respectively.
The last time the MRO was this low was in March 2025.
New projections by ECB staff see headline inflation averaging 3.0% in 2026, before easing to 2.5% in 2027 and 2.1% in 2028, with the latter two years' numbers revised higher than previous estimates in June.
Over the next three years, core inflation (which excludes the more volatile energy and food items) is seen at 2.5%, 2.6% and 2.3% respectively.
While the eurozone has shown "greater-than-expected resilience", according to the ECB, the outlook remains "highly uncertain", with risks to the downside for economic growth. The single currency economy is expected to expand by 0.9% in 2026, 1.4% in 2027 and 1.5% in 2028, according to ECB forecasts.
At the same time, inflation risks remain to the upside, the ECB said. The latest Eurostat figures showed the annual rate of inflation rising to 3.3% in August from 2.9% in July following a renewed spike in energy prices. This was the highest level since September 2023.
"With today's decision, the Governing Council remains well positioned to navigate the uncertainty caused by the conflict. It will follow a data-dependent and meeting-by-meeting approach to determining the appropriate monetary policy stance," the ECB said in a statement.
The central bank added that policymakers were not pre-committing to a particular rate path.
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