The European Central Bank (ECB) raised its key interest rates, the central bank announced on Thursday following its Council meeting in Frankfurt. Consequently, the rates for the deposit facility, the main refinancing operations, and the marginal refinancing facility are now set at 2.50 percent, 2.65 percent, and 2.90 percent, respectively.
ECB officials noted that the conflict in the Middle East continues to exert inflationary pressure, predicting that inflation will remain significantly above the target for a prolonged period. They emphasized that this decision underscores the ECB Council’s determination to steer monetary policy in a way that stabilizes inflation at the two percent target over the medium term.
Regarding future projections, the ECB experts anticipate that the overall average inflation rate will stand at 3.0 percent in 2026, 2.5 percent in 2027, and 2.1 percent in 2028 based on the basic scenario. For inflation excluding energy and food, the basic scenario projects 2.5 percent for 2026, 2.6 percent for 2027, and 2.3 percent for 2028. While the inflation projection for 2026 remains unchanged compared to June, the projections for 2027 and 2028 have been revised upwards.
In terms of economic growth, the ECB’s basic scenario forecasts 0.9 percent for 2026, 1.4 percent for 2027, and 1.5 percent for 2028. These figures represent an upward revision for 2027 and 2028. The central bank explained that this reflects a stronger-than-expected resilience in the Eurozone economy.
The outlook remains subject to significant uncertainty, with risks to inflation pointing upwards and risks to economic growth pointing downwards. The updated scenarios from the experts show a wide range of possible outcomes for growth and inflation, depending on the intensity and duration of the energy shock.
In light of today’s decision, the ECB Council remains “well-positioned to manage the uncertainty caused by the conflict.” The bank stated that its monetary policy course will be adjusted based on new data at each meeting. Furthermore, interest rate decisions will be guided by the Council’s assessment of inflation outlooks and related risks, considering current economic and financial data, as well as the dynamics of underlying inflation and the strength of monetary policy transmission. The ECB Council will not commit to a specific interest rate path in advance.
