ECB interest rate decision: Still trying to climb higher
Summary
- The European Central Bank raised its key policy rates by 25 basis points, bringing the deposit rate to 2.5%, influenced by the Middle East crisis and rising energy costs.
- Economic growth estimates were revised upwards, aligning with positive economic surprises in the euro area, while inflation estimates for 2027–2028 were also increased, with the 2% target not expected to be reached by 2028.
- ECB President Lagarde noted that inflation has been slower than feared in the short term but more persistent in the long term, and future guidance was not discussed at the meeting.
- Market expectations still anticipate further rate hikes, but the recent decision allows the central bank time to adapt to the current economic situation.
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Automatic translation: Originally published in Finnish 10/09/2026, 13:38 GMT. Give feedback here.
The European Central Bank's interest rate decision on Thursday was largely expected. The central bank raised its key policy rates by 25 basis points, bringing the deposit rate to 2.5%. This hike gave the central bank a breather before its next moves. Positive flickers were seen in the economic estimates.
The rate hike was driven in particular by the Middle East crisis and the resulting rise in energy costs, which has already previously caused the central bank to warn of rising inflationary pressures. This has been reflected in an increasingly hawkish tone, on average, in the speeches of ECB policymakers. The door is kept open for further rate hikes, but on the other hand, this hike also allows time to adapt to the situation and uncertainty.
Source: Bloomberg
On the positive side, economic growth estimates were revised slightly upwards, which was in line with positive economic surprises in the euro area. Inflation estimates were also revised upwards for 2027–2028, and the 2% target would not be reached even by 2028. According to President Lagarde, inflation has indeed surprised the central bank: not only by being slower in the short term than feared, particularly regarding food, but also by proving to be more persistent than expected in the longer term.
| ECB's updated estimates | ||||
| 2026 | 2027 | 2028 | ||
| GDP | ||||
| September | 0,9 % | 1,4 % | 1,5 % | |
| June | 0,8 % | 1,2 % | 1,5 % | |
| Inflation | ||||
| September | 3,0 % | 2,5 % | 2,1 % | |
| June | 3,0 % | 2,3 % | 2,0 % | |
| Core inflation | ||||
| September | 2,5 % | 2,6 % | 2,3 % | |
| June | 2,5 % | 2,5 % | 2,2 % |
Still, Lagarde did not elaborate on the central bank's future actions, and according to her, guidance was not even discussed at the meeting. Market expectations are still leaning towards rate hikes, but today's move gave the central bank some time to pause before the next hike.
