ECB raises interest rates again amid Iran war inflation pressure

ECB raises interest rates again amid Iran war inflation pressure

Thu, September 10, 2026 at 3:33 PM GMT+3 2 min read

The European Central Bank raised its three key interest rates by 25 basis points on Thursday, citing sustained inflation pressure from the conflict in the Middle East. The deposit facility rate will rise to 2.50%, the main refinancing rate to 2.65%, and the marginal lending facility rate to 2.90%, all effective September 16, the ECB 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," the ECB's Governing Council said in a statement.

The rate increase was the second since the U.S.-Iran war began. In June, the ECB had lifted rates for the first time since 2023, pushing the deposit rate up to 2.25%, before holding steady at its next meeting, according to CNBC. Thursday's move was fully anticipated by markets, which had assigned certainty to the 25-basis-point increase, according to CNBC, citing LSEG data.

August data showed the euro zone's headline inflation rate reached 3.3%, with the energy component running at 14.3%. The ECB's new staff projections see headline inflation averaging 3.0% in 2026, 2.5% in 2027, and 2.1% in 2028. Core inflation, excluding energy and food, is projected at 2.5% in 2026, 2.6% in 2027, and 2.3% in 2028 — revised upward for 2027 and 2028 compared with June projections, the ECB said. The bank's 2% target remains the medium-term goal.

The ECB also revised its economic growth outlook upward, projecting 0.9% growth for 2026 and 1.4% for 2027, reflecting what it described as greater than expected resilience in the euro area economy. The Governing Council noted that risks remain tilted to the upside for inflation and to the downside for growth.

Because the euro zone depends heavily on imported energy, it has been exposed to price pressures ever since hostilities in the Middle East put commodity shipments through the Strait of Hormuz at risk and drove oil prices upward, according to CNBC. Sovereign borrowing costs across the region have moved sharply higher, with Germany's 10-year Bund yield reaching 3.451%, a level last seen in 2011, as investors factored in a more persistent inflation and tightening outlook.

The Governing Council stopped short of signaling any future moves, reiterating that each upcoming decision would be evaluated on its own merits as new data arrive. ECB President Christine Lagarde is scheduled to hold a press conference at 8:45 a.m. ET on Thursday.