ECB raises rates 25 basis points as 2027–28 inflation forecasts rise

The European Central Bank moved on September 10, raising all three key interest rates by 25 basis points.

Effective September 16, the deposit facility rate moves to 2.50%, the main refinancing operations rate to 2.65%, and the marginal lending facility to 2.90%, per the ECB’s rate decision.

ECB President Christine Lagarde framed it in terms the statement makes hard to misread: “The conflict in the Middle East continues to generate inflation pressures, and inflation is set to remain well above target for an extended period. Today’s decision underscores our commitment to setting monetary policy to ensure that inflation stabilises at our two per cent target in the medium term.”

The August data showed a mixed inflation picture. Headline inflation climbed to 3.3% from July’s 2.9%. Energy-price inflation jumped 4.0 percentage points — from 10.3% to 14.3%. Food inflation was flat at 1.2%, while services inflation fell from 3.3% to 3.0% and inflation excluding energy and food edged down from 2.5% to 2.4%. Goods inflation increased from 0.9% to 1.2%.

Staff projections show inflation sitting above the 2% target through 2028: headline at 3.0% this year, 2.5% in 2027, 2.1% in 2028. The ex-energy-and-food measure runs 2.5%, 2.6%, and 2.3% across those years. The 2026 headline figure was unchanged from June’s projections; 2027 and 2028 were revised higher, though the ECB’s published statement gives the direction without the size, so specific basis-point adjustments can’t be derived from the available figures.

Growth projections were revised up. The ECB now projects 0.9% expansion in 2026, 1.4% in 2027, 1.5% in 2028, revised up on greater-than-expected economic resilience.

That resilience is running into tighter credit. Bank lending rates for firms reached 3.8% in June and July, up from 3.6% in May. Market-based corporate debt cost 4.0% in July. Annual growth in bank lending to firms hit 4.4% in July versus 4.0% in May and June. Mortgage rates held at 3.5%, though lending growth there softened slightly — 3.0% in July against 3.1% in May and June.

For crypto funding, the transmission is conditional and worth being precise about. Euro cash or euro-backed stablecoin reserves used as yield-product references could — as a matter of analysis, not ECB forecast — see prospective returns shift upward with the 25-basis-point deposit-facility increase on September 16. DeFi lending markets pricing primarily off dollar liquidity and on-chain utilization won’t automatically reset. The ECB’s statement contains no protocol governance vote, no stablecoin reserve disclosure, no on-chain rate change — so no specific DeFi repricing can be confirmed from what’s published.

The possible carry-trade implication is conditional. Stablecoin holders comparing reserve-linked returns against official euro rates face a higher policy reference starting September 16 — again, as a matter of analysis rather than ECB guidance. Euro-denominated borrowers do too.

Lagarde was direct about what the bank isn’t promising beyond this: “We are not pre-committing to a particular rate path.” The Governing Council will run a data-dependent, meeting-by-meeting approach, weighing the inflation outlook, incoming economic and financial data, underlying inflation dynamics, and how monetary-policy transmission is actually flowing through.