European Central Bank raises interest rates. It's the second time this year

O Council of the European Central Bank (ECB) decided this Thursday to increase the three key ECB interest rates by 25 basis points for the second time this year. 

“The conflict in the Middle East continues to generate inflationary pressures and inflation should remain well above the target for an extended period. Today’s decision underlines the Governing Council’s commitment to define monetary policy in order to ensure that inflation stabilises at 2% in the medium term”, can be read in the notified published by the institution. 

The ECB reveals that “according to the benchmark projections of new ECB staff projections, overall inflation will average 3.0% in 2026, 2.5% in 2027 and 2.1% in 2028”.

“For inflation excluding energy and food prices, reference projections point to 2.5% in 2026, 2.6% in 2027 and 2.3% in 2028. In comparison with June, the reference projections for inflation in 2026 remain unchanged and were revised upwards from 2027 and 2028. Reference projections for economic growth are 0.9% in 2026, 1.4% in 2027 and 1.5% in 2028. This is a high review for 2026 and 2027, reflecting above all a greater resilience of the euro area economy than expected,” he said. 

The institution admits that “the prospects remain extremely uncertain, with high risks to inflation and low for economic growth”.

“ With regard to energy shock, the updated scenarios prepared by experts illustrate the wide range of results for growth and inflation evolution based on different assumptions on the intensity and duration of shock, as well as its indirect and second-order effects”, can be read in the note. 

How do the interest rates look? 

With this increase, “the interest rates applicable to the deposit facility, the main refinancing operations and the marginal lending facility will be increased to, respectively, 2.50%, 2.65% and 2.90%, with effect from 16 september 2026“. 

“The Governing Council of the ECB is prepared to adjust all instruments at its disposal within the framework of its mandate to ensure that inflation stabilises in its 2% medium-term objective and to preserve the smooth functioning of the transmission of monetary policy. In addition, the Transmission Protection Instrument is available to counter disordered, unjustified and liable market dynamics that pose a serious threat to the transmission of monetary policy in all euro area countries, thus enabling the Governing Council to comply more effectively with its mandate for price stability,” the institution further said.

[News updated at 1.20 p.m.]