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ECB lifts key rates, effective Sept. 16, citing uncertain outlook
The ECB warned risks are tilted to higher inflation but weaker growth, leaving the door open to further tightening as energy and gas shocks are monitored.
The European Central Bank raised three key policy rates, effective September 16, pushing the Deposit Facility Rate to 2.50%, the Refinancing Rate to 2.65% and the Marginal Lending Facility to 2.90%.
In its accompanying guidance, the ECB said the outlook remains highly uncertain, with risks skewed to the upside for inflation and to the downside for growth, while it chose not to pre-commit to a specific future rate path.
ECB staff projections call for headline inflation to average 3.0% in 2026, 2.5% in 2027 and 2.1% in 2028, with the 2027 and 2028 forecasts revised higher from June.
The bank also highlighted inflation excluding energy and food staying above target, and pointed to resilience in consumption, public investment and a recovery in services, even as employment growth slows; it singled out a difficult energy shock, noting higher prices could feed into core inflation and food costs.
After the decision, markets are pricing in another quarter-point hike at the ECB meeting on October 29 with a probability just above 61%, with nearly 35 basis points of additional tightening by year end, according to the report.