The European Central Bank raised its key interest rates on 10 September 2026, with the main refinancing rate moving to 2.65% and the deposit facility rate to 2.50%. The 25-basis-point increase was widely anticipated by markets, but policymakers delivered a hawkish message: renewed US-Iran fighting and surging energy costs are pushing inflation through the eurozone economy.
ECB President Christine Lagarde told reporters in Berlin that "inflation will be longer lasting than we had anticipated." The central bank’s updated forecasts see eurozone inflation averaging 3% in 2026—well above the 2% target—with headline inflation expected to return to around target only towards the end of 2027. The growth projection for 2026 was revised up to 0.9% from 0.8%.
Inflation data underscored the pressure: annual headline inflation hit 3.3% in August, the highest in about three years, mainly due to higher energy prices. Energy markets remained strained: Brent crude traded around $104.5 per barrel after topping $105, while the Dutch TTF gas benchmark rose above €82.56 per megawatt hour. EU gas storage was only 67% full compared with a five-year average of 84%, increasing risks of a winter supply scramble.
The rate decision rippled through bond markets. The 10-year UK gilt yield climbed to 5.36%, a level last seen in 2007; Germany’s 30-year yield hit 5.08%, the highest since 2003; and France’s 10-year yield reached 4.344%. In the US, Treasury Secretary Scott Bessent announced a $6 billion buyback to ease pressure, but the 10-year Treasury yield still rose to a three-year high.
For euro pairs, EURJPY remained vulnerable below ¥180, with traders watching the Bank of Japan’s September 18 meeting and possible intervention. EURGBP faced resistance around 86p, with UK inflation data due on September 16 expected to show annual headline inflation of 3.1%.
The hawkish tone, higher government bond yields and persistent energy-driven inflation are likely to keep risk assets, including cryptocurrencies, under pressure as liquidity conditions tighten.
