ECB Raises Rates to 2.50% as Middle East Conflict Drives Energy Inflation

The ECB Governing Council, meeting in Berlin, raised all three key interest rates by 25 basis points — the deposit facility to 2.50%, the main refinancing rate to 2.65%, and the marginal lending facility to 2.90%, effective September 16 — its second hike of 2026 after June's increase and July's pause. President Christine Lagarde said 'the conflict in the Middle East continues to generate inflation pressures, and inflation is set to remain well above target for an extended period,' citing high oil prices driven by shipping disruption through the Strait of Hormuz. Eurozone HICP inflation hit 3.3% in August, its highest since September 2023. New staff projections put headline inflation at 3.0% for 2026, 2.5% for 2027 and 2.1% for 2028, with growth revised up to 0.9% (2026), 1.4% (2027) and 1.5% (2028). Lagarde declined to commit to a rate path, saying the Council would decide meeting by meeting, but markets raised bets on further hikes over the next 12 months.