ECB set to raise rates as energy inflation persists

The European Central Bank is widely expected to raise interest rates on Thursday, September 10, 2026, lifting its deposit rate by 25 basis points from 2.25 percent to 2.5 percent in what would be the second hike of the year. Markets have essentially fully priced in the move, and sources familiar with the central bank's thinking, along with the minutes of its July meeting, indicate policymakers are prepared to tighten again as energy costs keep inflation well above target. The driving force is a renewed surge in energy prices tied to the ongoing US-Iran war. Brent crude has climbed over the past month, European natural gas prices have reached their highest levels since early 2023, and eurozone inflation rose back above 3 percent in August. Figures published this week put headline inflation at 3.3 percent, the highest since September 2023, with energy inflation surging to 14.3 percent from 10.3 percent. The ECB targets 2 percent inflation, and its own projections see prices averaging 3.0 percent for 2026. What makes the decision awkward is that underlying pressures are actually easing. Core inflation fell to 2.4 percent in August from 2.