ECB raises interest rates again amid Middle East tensions

The Governing Council of the European Central Bank (ECB), meeting in Frankfurt, has decided to raise interest rates across the eurozone. The deposit facility rate, which serves as the main reference for monetary policy, will increase to 2.5%. At the same time, the main refinancing operations rate was raised to 2.65%, and the marginal lending facility rate will reach 2.9%. All changes take effect on September 16.

In its statement, the ECB said the decision reflects the impact of the Middle East conflict on inflation, which the bank expects to remain significantly above its 2% target for an extended period. The Council stressed that the move demonstrates its commitment to steering inflation back to the target level over the medium term.

Updated inflation and growth forecasts

ECB staff have also updated their macroeconomic projections. Overall eurozone inflation is expected to average 3% in 2026, easing to 2.5% in 2027 and 2.1% in 2028. Core inflation, excluding energy and food prices, is projected at 2.5% in 2026, 2.6% in 2027 and 2.3% in 2028. Compared with the June projections, the 2026 forecast is unchanged, while the 2027 and 2028 figures have been revised upward.

Economic growth is projected at 0.9% in 2026, 1.4% in 2027 and 1.5% in 2028. The Council attributed the upward revisions mainly to greater-than-expected resilience of the eurozone economy.

The ECB acknowledged that the outlook remains highly uncertain, with inflation risks tilted to the upside and growth risks tilted to the downside. The Council said future rate decisions will continue to be based on incoming economic and financial data assessed meeting by meeting, without committing in advance to a specific rate path.

The ECB last changed its key rates in June, when it also raised them by 0.25 percentage points. According to Eurostat data, annual eurozone inflation rose to 3.3% in August, up from 2.9% in July.