The ECB Has Raised Rates Again. Its Own Forecast Says Inflation Stays Above Target Until 2028.

The European Central Bank raised interest rates on 10 September 2026, by a quarter of a percentage point across all three of its key rates. The deposit facility rate — the one that actually sets the floor for money-market rates in the euro area — moves from 2.25% to 2.50%. The change takes effect on 16 September.

The more consequential part of the announcement was not the rate itself. It was the projection published alongside it, which does not show inflation reaching the 2% target at any point in the forecast.

What changed

• Deposit facility rate: 2.50%, up from 2.25%
• Main refinancing operations rate: 2.65%, up from 2.40%
• Marginal lending facility rate: 2.90%, up from 2.65%
• Effective date: 16 September 2026

The three rates move together and keep their usual spacing. The deposit rate is what banks earn on reserves parked at the Eurosystem overnight; the main refinancing rate is the cost of the ECB weekly lending operations; the marginal lending rate is the penalty rate for overnight borrowing. Because the euro area has run with ample excess reserves for years, the deposit rate is the one that transmits into market pricing.

The projections are the story

The staff baseline published with the decision puts headline euro-area inflation at 3.0% in 2026, 2.5% in 2027 and 2.1% in 2028. Core inflation, which strips out energy and food, is projected at 2.5%, 2.6% and 2.3% over the same three years.

Two things stand out in that sequence. Headline inflation never quite lands on target inside the horizon. And core inflation is projected to be higher in 2027 than in 2026 — the disinflation is expected to come from energy and food falling out of the comparison, not from underlying price pressure easing.

Growth is projected at 0.9% in 2026, 1.4% in 2027 and 1.5% in 2028.

Inflation is set to remain well above target for an extended period.

The Council attributed the persistence in part to the conflict in the Middle East, which has fed through to energy costs.

The balance sheet keeps shrinking on its own

The statement repeated the standing position on the asset purchase programme and the pandemic emergency purchase programme: the portfolios are declining at a measured and predictable pace because the Eurosystem no longer reinvests the principal from maturing securities. There is no active selling, and no change was announced. Passive run-off continues to tighten financial conditions alongside the rate rise, without requiring a separate decision at each meeting.

No promise about what comes next

The Governing Council restated that it is following a data-dependent, meeting-by-meeting approach and is not pre-committing to a rate path. That phrasing has been standard for several years, but it does real work here: a central bank publishing a forecast of above-target inflation through 2028 is not, by that fact alone, signalling further tightening. It is declining to say.