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ECB raises key interest rates by 25 basis points
ECB projected headline inflation averaging 3.0% in 2026 before easing to 2.1% in 2028, alongside euro area growth forecasts of 0.9% to 1.5% over the same period.
The ECB raised its three key interest rates by 25 basis points, while warning that the Middle East conflict continues to generate inflation pressures. The central bank said inflation is expected to remain well above its 2% target for an extended period.
In its baseline projections, the ECB sees headline inflation averaging 3.0% in 2026, 2.5% in 2027, and 2.1% in 2028. It also projected inflation excluding energy and food at 2.5% in 2026, 2.6% in 2027, and 2.3% in 2028.
Compared with its June outlook, the ECB said the 2026 inflation projection is unchanged, while forecasts for 2027 and 2028 were revised higher. It cited greater than expected resilience in the euro area, and projected economic growth of 0.9% in 2026, 1.4% in 2027, and 1.5% in 2028, with upside risks to inflation and downside risks to growth.
The ECB said it will take a data dependent, meeting by meeting approach and is not pre committing to a particular rate path, basing decisions on the inflation outlook and risks in light of incoming economic and financial data, as well as underlying inflation dynamics and the strength of monetary policy transmission.