- Lior mor
- •
- 4 Min Read
- •
- 4 weeks ago
Key Points
- The ECB raised its three key interest rates by 0.25 percentage point, taking the deposit rate to 2.50% as higher energy costs push inflation forecasts higher.
- The euro weakened despite the rate increase, while the Dollar Index climbed to 99.12 as markets reassessed the outlook for US monetary policy.
- Brent crude jumped 6.3% to $107.63 a barrel, increasing the inflation risk facing both the ECB and the Federal Reserve.
The dollar strengthened while the euro came under pressure after the European Central Bank raised interest rates again, highlighting the growing complexity facing global currency markets. The policy divergence between the ECB and Federal Reserve is unfolding against a renewed energy shock, with sharply higher oil prices threatening to prolong inflation and complicate the path of interest rates.
ECB Tightens Policy as Energy Inflation Accelerates
The ECB raised all three of its key interest rates by 0.25 percentage point. The deposit facility rate increased to 2.50%, the main refinancing rate rose to 2.65%, and the marginal lending facility rate reached 2.90%. The changes are scheduled to take effect on September 16, 2026.
The decision reflects a deterioration in the inflation outlook following the surge in energy prices and escalating conflict in the Middle East. The ECB now expects inflation to average 3.0% in 2026, 2.5% in 2027 and 2.1% in 2028, remaining above its 2% target throughout the forecast period.
At the same time, the ECB upgraded its growth outlook, projecting economic expansion of 0.9% in 2026, 1.4% in 2027 and 1.5% in 2028. The combination of higher inflation and continued growth gives the central bank greater room to maintain restrictive policy, although the risk of an energy-driven slowdown remains.
Why Did the Euro Fall After the Rate Hike?
The euro initially fell about 0.28% against the dollar to $1.1599 following the ECB announcement. The move illustrates an important feature of currency markets: higher interest rates do not automatically translate into a stronger currency when investors have already anticipated the decision.
The dollar, meanwhile, gained 0.34% to 99.12 on the Dollar Index after three consecutive sessions of declines. US producer-price data was broadly in line with expectations, but the broader inflation picture reinforced expectations that the Federal Reserve could raise interest rates as soon as the following
Comparison, examination, and analysis between investment houses
Leave your details, and an expert from our team will get back to you as soon as possible
* This article, in whole or in part, does not contain any promise of investment returns, nor does it constitute professional advice to make investments in any particular field.
To read more about the full disclaimer, click here
- sagi habasov
- •
- 6 Min Read
- •
- ago 15 hours
SKN | China Bond Yields Fall as Global Borrowing Costs Rise
The contrast is particularly striking as government bond markets elsewhere face renewed selling pressure. In the United States, the 10-year
- ago 15 hours
- •
- 6 Min Read
The contrast is particularly striking as government bond markets elsewhere face renewed selling pressure. In the United States, the 10-year
- Ronny Mor
- •
- 6 Min Read
- •
- ago 18 hours
SKN | Fed’s Musalem Says More Rate Hikes May Be Needed to Bring Inflation Back to 2%
Federal Reserve Bank of St. Louis President Alberto Musalem said Thursday that the U.S. central bank will need to
- ago 18 hours
- •
- 6 Min Read
Federal Reserve Bank of St. Louis President Alberto Musalem said Thursday that the U.S. central bank will need to
- Ronny Mor
- •
- 7 Min Read
- •
- ago 19 hours
SKN | Euro Zone Begins Search for ECB Board Member Schnabel’s Successor
Euro zone finance ministers have begun the process of selecting a successor to European Central Bank Executive Board member
- ago 19 hours
- •
- 7 Min Read
Euro zone finance ministers have begun the process of selecting a successor to European Central Bank Executive Board member
- Arik Arkadi Sluzki
- •
- 6 Min Read
- •
- ago 20 hours
SKN | Dollar Dips as European Bond Yields Retreat From Highs
The U.S. dollar declined on Thursday as European government bond yields pulled back from their intraday highs, allowing the
- ago 20 hours
- •
- 6 Min Read
The U.S. dollar declined on Thursday as European government bond yields pulled back from their intraday highs, allowing the
