Deposit rate raised to 2.50 percent as energy shock lifts inflation

The Governing Council raised the deposit facility rate to 2.50 percent, the main refinancing rate to 2.65 percent and the marginal lending facility to 2.90 percent, taking effect on September 16, 2026.

Headline inflation rose to 3.3 percent in August from 2.9 percent in July, driven by energy inflation rising to 14.3 percent.

The ECB staff macroeconomic projections now foresee headline inflation averaging 3.0 percent in 2026, 2.5 percent in 2027 and 2.1 percent in 2028.

This marks upward revisions of 0.2 percentage points for 2027 and 0.1 percentage points for 2028.

Meanwhile, baseline GDP growth projections were revised upward to 0.9 percent in 2026 and 1.4 percent in 2027, before reaching 1.5 percent in 2028.

Economic activity grew by 0.6 percent in the second quarter of 2026, or 0.3 percent excluding Ireland, while unemployment held steady at 6.4 percent in July.

Financing conditions tightened across maturities, with ten-year risk-free rates rising 37bp to 3.2 percent and the GDP-weighted sovereign bond yield reaching 3.9 percent.

Despite higher yields, bank lending to non-financial corporations expanded at an annual rate of 4.4 percent in July, with corporate borrowing costs at 3.8 percent and mortgage rates stable at 3.5 percent.