ECB raises the deposit rate to 2.50% as energy inflation climbs to 14.3%

The European Central Bank raised rates on Thursday even as wages, unit labour costs and core prices in the euro area were still slowing. The Governing Council moved anyway, on energy-price inflation that climbed to 14.3% and on staff projections that still have headline inflation at 2.1% in 2028. President Christine Lagarde said the Council is not pre-committing to a particular rate path.

Staff hold 2026 inflation at 3.0% and raise 2027 and 2028

New ECB staff projections put headline inflation at 3.0% in 2026, 2.5% in 2027 and 2.1% in 2028. Compared with the June round, which had 3.0%, 2.3% and 2.0%, this year is unchanged and the two later years are higher. Inflation excluding energy and food is seen at 2.5% in 2026, 2.6% in 2027 and 2.3% in 2028, a path that has core remaining above the 2% target through the forecast.

The same round raised the growth path. Staff now project real GDP at 0.9% in 2026, 1.4% in 2027 and 1.5% in 2028, against June’s 0.8%, 1.2% and 1.5%. The statement called that an upward revision for 2026 and 2027, “mainly reflecting the greater than expected resilience of the euro area economy,” including private consumption and public spending.

Energy is jumping. Wages are not

Euro area inflation rose to 3.3% in August from 2.9% in July. Energy-price inflation climbed to 14.3% from 10.3%, a move the statement said likely reflected refining margins on liquid fuels as well as higher commodity prices. Food inflation was unchanged at 1.2%. Inflation excluding energy and food edged down to 2.4% from 2.5%, with services slowing to 3.0% from 3.3%.

“Higher energy prices are expected to feed through gradually to core and food price inflation,” Lagarde said. On wages she was explicit: they “do not show a material response to the energy shock at this stage.” Compensation per employee grew 3.3% year on year in the second quarter, down from 3.5% in the first; unit labour costs slowed to 2.6% from 3.5%.

The warning sat next to that calm. “The longer energy prices stay high, the more likely they are to drive up broader inflation through indirect and second-round effects.” Policy will stay data-dependent and meeting-by-meeting. The statement does not name another hike date. After the 2025 easing that took the deposit rate from 2.75% to 2.00%, the Council has put 50 basis points back in since June 2026. Both the June and September statements cited the Middle East conflict as generating inflation pressures.

Eurozone funds in New York

The decision has not, in early New York trading, produced a distinct eurozone-equity move. As of 9:57 a.m. Eastern time, the Euro STOXX 50 was at 6,278.30, down 0.48%, with the DAX off 0.45% and the CAC 40 off 0.49%. The S&P 500 was down 0.68% in the same window. Crude extended an already-expensive energy shock: Brent was at $104.54 a barrel, up 3.3%, and West Texas Intermediate at $99.25, up 3.3%, as of 9:58 a.m. The U.S. dollar index was at 99.02, up 0.20%.

U.S.-listed eurozone equity funds were lower with that board.

AEZU, graded A, holds large- and mid-cap companies in economies that use the euro; financials are the largest slice, at 26.5% of assets. DHEZU, graded D, holds the same kind of book and uses currency contracts to reduce swings in the euro against the dollar. AFEZ, graded A, tracks the 50-stock euro-area benchmark.

If a later policy gap with the Federal Reserve moves the euro, that channel shows up in the unhedged fund and is designed to be stripped out of the hedged one. During Lagarde’s press conference the euro was at $1.1615, down 0.15% on the day. Thursday’s session does not settle it.

The Fed decides next week

The Federal Reserve meets Tuesday, September 15, and Wednesday, September 16, with a statement due at 2 p.m. Eastern time on Wednesday. Fed funds futures as of September 9 implied more than a 60% probability of a 25-basis-point increase at that meeting, from the current 3.50%-3.75% target range. Governor Christopher Waller said on September 3 that if incoming August data showed disinflation continuing, he would be inclined to hold at that setting, and that if the improvement proved fleeting, “it may be appropriate to raise the policy rate.” He said his decision would be heavily influenced by what arrives on August inflation.

The ECB has now hiked twice in 2026 and refused to map the next step. Lagarde’s own test is the one the statement named: how long energy prices stay high, and whether they start to move wages, core prices and expectations. Those answers are not in Thursday’s decision. They are in the oil market still trading above $100 on Brent, and in the data both central banks said they will wait for.