HighIV Macro Policy & Sovereign Debt10 September 2026, Thursday · 15:15 TRT (UTC+3)
ECB raises its three policy rates by 25 basis points, taking the deposit rate to 2.50%
The pass-through of the Middle East war to energy prices has forced the European Central Bank to continue tightening.
On 10 September the European Central Bank raised the deposit facility rate to 2.50%, the main refinancing rate to 2.65% and the marginal lending facility rate to 2.90%; the new rates took effect on 16 September. The bank's latest projections see inflation at 3.0% in 2026, 2.5% in 2027 and 2.1% in 2028; the 2026 growth forecast is 0.9%.
According to Eurostat's flash estimate, annual euro area inflation rose to 3.3% in August; energy prices rose 14.3% year on year and core inflation held at 2.4%. According to Trading Economics, futures markets are pricing one more hike by the end of the year. The German 10-year yield hit 3.55%, its highest level since June 2009.
Talay assessment
Bottom line
The ECB is accepting a growth cost to stop energy-driven inflation becoming entrenched: against inflation that rose to 3.3% in August, the 2026 growth forecast is only 0.9%. Futures pricing one more hike by year-end and projections showing inflation falling to 2.1% by 2028 suggest tightening is not over but will remain limited. The decisive variable is the path of energy prices driven by the Middle East.
Likely effects
- Euro area growthNegative1–6 months
Higher borrowing costs curb investment and housing demand in an economy already expected to grow by only 0.9%; households and industry squeezed by energy bills face pressure from both sides.
- Euro area borrowing costsNegativeWeeks
The rise in the German 10-year yield to its highest since June 2009 lifts public and corporate borrowing costs across the region; highly indebted members are the most exposed.
- Türkiye exports and financingNegative1–6 months
Slowing demand in the euro area could weaken orders in Türkiye's main export market; higher euro-denominated external borrowing costs also add to the refinancing burden of Turkish banks and companies.
Possibilities, ranked
- 1One more hike by year-end60%
Energy prices stay high and September–October inflation hovers around 3%; the ECB hikes once more in line with market pricing, then signals a pause.
Watch: Energy component keeping its annual rise in September and October flash inflation, and ECB officials' remarks
- 2Hold at the current level35%
Weak growth and widening periphery spreads make the ECB cautious; the deposit rate is kept at 2.50% while the impact of energy prices is monitored.
Watch: Core inflation staying around 2.4%, signs of contraction in growth data and widening yield spreads
- 3Energy shock fades and early easing5%
Energy prices fall quickly as Middle East tensions ease; inflation drops faster than expected and the ECB brings forward the easing debate.
Watch: A marked and sustained fall in energy prices and a rapid decline in euro area energy inflation
Probabilities are calibrated judgement based on the sources, not measurement, and are revised as new information arrives. Not investment advice.