ECB raises eurozone deposit rate to 2.50% from September 16

The European Central Bank (ECB) agreed on Thursday (September 10, 2026) to raise its key deposit rate by 0.25 percentage points, from 2.25% to 2.50%, in response to energy-driven inflation pressure across the eurozone. The increase, its second this year, takes effect on September 16.

Attacks on military targets, shipping and energy infrastructure in the Middle East since late August have pushed oil back above US$100 a barrel, about 3,300 baht. The eurozone’s heavy dependence on imported energy leaves it exposed to renewed inflation pressure.

In its September 10 assessment, the ECB noted that eurozone inflation had climbed above 3%, well beyond its 2% target. The central bank warned that a prolonged period of expensive energy could feed through to prices across a wider range of goods and services.

Markets anticipate further increases

Money markets increased their expectations for further ECB tightening after the September 10 decision, pricing in about 0.60 percentage points of additional increases by April 2027, compared with roughly 0.51 percentage points before the meeting.

Some investors considered October 2026 the earliest opportunity for another ECB increase and saw a December rise as highly likely. Those expectations do not represent a commitment by the central bank.

European bond markets came under selling pressure following the ECB’s September 10 decision, with Germany’s 10-year government bond yield reaching its highest level since 2011. Oil’s climb above US$105 a barrel, about 3,500 baht, added to pressure on eurozone inflation and borrowing costs.

Inflation could stay higher for longer

ECB president Christine Lagarde warned that the economic outlook remained highly uncertain, with inflation risks tilted upwards and growth risks downwards. Lagarde indicated that inflation was likely to remain elevated for longer than the central bank had previously expected.

The ECB’s updated projections put average eurozone inflation at 3.0% in 2026, 2.5% in 2027 and 2.1% in 2028. The 2027 forecast was raised from 2.3%, while the projected 2028 rate also remains above the bank’s 2% target.

The ECB raised its eurozone growth forecast for 2026 to 0.9% from 0.8%, and its 2027 estimate to 1.4% from 1.2%. The upgrades reflect greater economic resilience despite the shock from higher energy prices.

Lagarde keeps future decisions open

Lagarde’s September 10 statement described the eurozone labour market as robust, while noting an easing in core inflation and wage growth. Slower wage growth helps limit the risk of wages and prices pushing each other higher.

Lagarde stressed that the ECB had not committed to a predetermined interest rate path. The central bank would assess incoming economic data and decide policy at each meeting, rather than promise further increases in advance.