ECB Raises Rates to 2.5% Amid 2027 Inflation Warning
The ECB has lifted its main deposit rate to 2.5% and revised its 2027 inflation forecast up to 2.5%, while also raising 2027 growth expectations to 1.4% due to economic resilience. With energy prices spiking on geopolitical risks, markets are now pricing in two additional rate hikes during 2026.
Morningstar notes that the ECB simultaneously raised its 2027 growth forecast to 1.4% and warned that the current 2.5% rate sits at the upper limit of the neutral range, implying further hikes would push policy into restrictive territory. Additionally, the bank revised its 2028 inflation projection upward to 2.1%, while Brent crude breached $102 amid renewed Strait of Hormuz tensions.
Source: GN markets/inflation (en-US)New reporting from GN markets/policy (en-US) reveals that the rate hike was a unanimous decision which Lagarde described as a "no-brainer," driven by inflation hitting a three-year high of 3.3% in August due to the Middle East conflict. While the bank refused to offer forward guidance, Deutsche Bank analysts note that a further hike in December is now more likely than not despite the growth risks posed by rising gas prices.
Source: GN markets/policy (en-US)The ECB lifted its main deposit rate by 25 basis points to 2.5%, its highest level since March 2025, while raising its 2027 inflation forecast to 2.5%.
Source: GN markets/inflation (en-US)
