Eurozone: ECB raises rates, deposit rate increases to 2.50%

Effective September 16, the rate for main refinancing operations will rise to 2.65%, and the marginal lending facility rate will increase to 2.90%. The deposit rate, which serves as a central benchmark for money markets in the eurozone, will be raised to 2.50%, up from 2.25% since June.

Annual inflation in the eurozone accelerated to 3.3% in August, up from 2.9% in July, according to Eurostat. Energy prices recorded the highest increase, rising by 14.3% year-on-year compared to 10.3% the previous month, while inflation excluding energy and food slightly slowed to 2.4%.

The ECB believes that tensions in the Middle East continue to fuel inflationary pressures and that the overall price increase is expected to remain above its target for an extended period. However, the institution emphasizes that wages have not shown a significant response to the energy shock at this stage.

The ECB’s new projections anticipate average inflation of 3.0% in 2026, 2.5% in 2027, and 2.1% in 2028. For inflation excluding energy and food, the forecasts are set at 2.5%, 2.6%, and 2.3%, respectively.

A more resilient eurozone economy

The central bank has slightly raised its growth outlook. The eurozone’s gross domestic product is now expected to increase by 0.9% in 2026, 1.4% in 2027, and 1.5% in 2028. The institution attributes this revision to better-than-expected resilience in activity, despite the energy shock.

Christine Lagarde, President of the ECB, stated that growth remained broadly distributed across countries and sectors in the second quarter. Private consumption and public spending supported activity, while the manufacturing sector benefited from investments in defense and infrastructure.

Nevertheless, the ECB refuses to commit to a predetermined rate path. It indicates that future decisions will depend on the evolution of inflation, economic and financial data, as well as the transmission of monetary policy into the economy.

Higher rates are already being transmitted to credit: the average cost of new loans to businesses in the eurozone was 3.8% in June and July, up from 3.6% in May. The rates for new mortgage loans remained unchanged at 3.5% in June and July.