ECB to raise rates to 2.50 percent as energy costs spike
The ECB has confirmed its decision to lift the deposit rate to 2.50% to counter Iran-conflict-driven inflation, a move that has intensified market expectations for further hikes by late 2026. While the bank projects 2026 inflation at 3.0%, it also raised its growth outlook, indicating that the eurozone economy is proving more resilient than previously thought despite the energy shock.
Money markets have sharpened their expectations for further tightening, pricing in an additional 0.60 percentage points of rate hikes by April 2027, with traders now viewing a December 2026 increase as highly likely, according to GN markets/policy (en-US). This hawkish repricing has pushed the German 10-year bond yield to its highest level since 2011, while the ECB revised its 2026 inflation forecast upward to 3.0% despite also nudging up its growth projections.
Source: GN markets/policy (en-US)TheJournal.ie highlights that this anticipated move would mark the second hike of the year, with analysts noting that over 100,000 Irish tracker mortgage holders face annual repayment increases of approximately €430, while Pictet Wealth Management warns of potential knock-on effects on domestic salary negotiations.
Source: GN markets/policy (en-US)The European Central Bank is expected to lift its policy rate to 2.50 percent on Thursday. This move addresses inflation risks driven by the Iran conflict.
Source: GN markets/inflation (en-US)
