ECB Slams Brakes on Euro Zone Inflation with Second Rate Hike in 2026

The European Central Bank (ECB) has raised interest rates for the second time in 2026, aiming to combat inflation driven by higher energy costs from the Iran war. The ECB's benchmark deposit rate is now at 2.5 per cent, the upper end of the 'neutral' range considered by policymakers.

The move comes as surging oil and natural gas prices have pushed inflation past 3 per cent across the 21-country euro zone in August, exceeding the ECB's 2 per cent target. The ECB has also lifted its 2026 economic growth projection to 0.9 per cent from 0.8 per cent seen in June.

ECB President Christine Lagarde will hold a press conference later on Thursday to explain the bank's outlook on rates. While financial investors are betting on further hikes, the ECB is likely to take its time with any follow-up move given a mixed outlook.