The Governing Council raises all three key ECB rates by 25 basis points. Deposit rate to 2.50%, refinancing rate to 2.65%, marginal lending rate to 2.90%, effective September 16, 2026. Consistent with the pricing already documented in the prior weekly analysis in this series, the ECB was identified as the most hawkish central bank in the group with 99% odds of a hike at this meeting.

The most important point in the new projections, headline inflation forecast stays unchanged for 2026 (3.0%) but is revised higher for 2027 (2.5% versus a previously lower projection) and 2028 (2.1%). Same pattern for core, revised up to 2.6% in 2027. This is a key signal, the ECB no longer treats the inflationary shock as purely transitory over the near horizon, it's now building in longer persistence into its central scenario.

Growth projections also revised higher for 2026 and 2027, explicitly attributed to stronger-than-expected resilience in the eurozone economy. This combination (inflation persisting longer than expected plus growth more resilient than expected) is the real driver behind the hike, not just the one-off energy shock.

The ECB explicitly cites the Middle East conflict as a source of prolonged inflationary tension. Consistent with the pattern documented across this entire analysis series (eurozone CPI, France PMI, US ISM, Australia GDP, RBNZ, BoC, Brent above $100), the ECB now explicitly joins the club of central banks factoring this geopolitical shock in as a structural driver of policy rather than a mere passing disturbance.

The Council stresses a meeting-by-meeting, data-dependent approach, with no prior commitment to a particular rate path. Internal scenarios on the energy shock show multiple possible trajectories depending on its intensity and duration, a sign the ECB itself acknowledges high uncertainty over the scale of tightening still to come.

EUR, this hike was largely anticipated (99% priced), so the direct impact of the decision itself should be limited. The real catalyst is the upward revision to 2027-2028 inflation projections, confirming an ECB ready to extend its tightening cycle longer than a purely transitory scenario would have justified. EUR/USD: bullish bias reinforced if the market prices in this persistence signal, to be weighed against a divided Fed (Warsh/Waller) still stuck in uncertainty. EUR/GBP: the ECB widening the gap with a BoE now leaning toward a hold could support a bullish bias on the pair.

Lagarde's press conference at 14:45 CET will be the real test for calibrating the scale of tightening ahead, particularly how the ECB plans to handle the prolonged energy-price volatility risk flagged in the statement. The "no prior commitment to a path" language leaves the door open to adjustment at every meeting depending on how the conflict evolves, keeping surprise risk alive at each future release.

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