ECB raises interest rates by 25 basis points

 The European Central Bank (ECB) announced on Thursday that it is increasing its key interest rates by 25 basis points for the second time since 2024. The rates on the deposit facility, the main refinancing operations, and the marginal lending facility will be increased to 2.50%, 2.65%, and 2.90%, respectively, from September 16.

The ECB's Governing Council said that the hike allows it to remain "well positioned to navigate the uncertainty" of the Middle East conflict and the energy crisis, adding that it will maintain its data-dependent and meeting-by-meeting approach to monetary policy.

According to the ECB's projections, headline inflation is expected to average 3% in 2026, 2.5% in 2027, and 2.1% in 2028, while core inflation, excluding food and energy, is expected to average 2.5% in 2026, 2.6% in 2027, and 2.3% in 2028. Economic growth is seen at 0.9% in 2026, 1.4% in 2027, and 1.5% in 2028. The inflation projection for 2026 was unchanged, while it was revised up for 2027 and 2028, and growth was revised up.

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