European Central Bank raises rate to 2.50% as inflation hits 3% by 2026
ECB President Christine Lagard warns the war in the Middle East keeps inflation above target for years. The new projections forecast general inflation at 3% in 2026 before trending down.
European Central Bank President Christine Lagard stated that conflict in the Middle East continues to generate inflationary pressure. She predicted that inflation will remain significantly higher than its 2% target for an extended period. To ensure stability, the bank raised its key interest rate from 2.25% to 2.50%. The new fundamental projections indicate general inflation will average 3% in 2026, rising slightly to 2.5% in 2027 and dropping to 2.1% in 2028. When excluding energy and food items, inflation is expected to reach 2.5% in 2026, climb to 2.6% in 2027, and fall to 2.3% in 2028. These forecasts represent an increase compared to June estimates for 2027 and 2028, while predictions for 2026 remained unchanged.
