ECB raises rates by a quarter point as energy prices keep inflation high

The European Central Bank raised its three key interest rates by 25 basis points on 10 September 2026. The deposit facility rate, which anchors short-term market rates in the euro area, rises to 2.50%. The rate on the main refinancing operations goes to 2.65% and the marginal lending facility to 2.90%. The new rates apply from 16 September.

Why the ECB raised rates

The Governing Council said the conflict in the Middle East continues to fuel inflationary pressure, and that inflation is expected to stay well above its 2% target for an extended period. The numbers support that view: Eurostat's flash estimate put euro area inflation at 3.3% in August, up from 2.9% in July, with energy prices 14.3% higher than a year earlier.

The ECB repeated that it sets policy meeting by meeting, based on incoming data, and is not committing in advance to a particular path for rates.

The new staff projections

Alongside the decision, ECB staff published updated forecasts. Headline inflation is now expected to average:

• 3.0% in 2026
• 2.5% in 2027
• 2.1% in 2028

Core inflation, which excludes energy and food, is projected at 2.5% in 2026, 2.6% in 2027 and 2.3% in 2028. Growth is expected to stay modest, at 0.9% this year, 1.4% in 2027 and 1.5% in 2028.

What euro traders are watching next

A rate rise on its own doesn't decide where a currency goes. Currency markets react to the gap between what a central bank does and what was already priced in, and to how its path compares with other central banks. For EUR/USD, that comparison is with the Federal Reserve, which announces its own decision on 16 September.

Beyond that, the inputs the ECB named are the ones to follow: energy prices, the next inflation releases on the economic calendar and any change in the Governing Council's language at its next meeting.

For background on how rate decisions feed through to exchange rates, see how interest rate decisions move currencies.