The European Central Bank raised interest rates by 25 bps, bringing the deposit rate up to 2.5%. The decision was fully priced in by investors, so the market reaction is minimal at this point.
EURUSD Chart
The euro is weakening against the dollar by around 0.2% today, but the move appears to be driven primarily by further increases in crude oil and LNG prices. A barrel of Brent currently costs close to 104 dollars.
Brent & WTI crude oil chart (2026)
Investors are waiting for President Lagarde's press conference scheduled for 2:45 PM.
In the foreground is the persistence of the inflation shock caused by the war in Iran. In August, inflation in the eurozone hit 3.3%, reaching its highest level in almost three years. The headline figure has remained above the ECB's 2% target for half a year now.
However, this does not mean that the path to further interest rate hikes will be smooth. The dovish faction is already expressing concerns about over-cooling the economy, while also emphasizing that core inflation remains at very subdued levels (2.4% in August). The key will be how the head of the ECB assesses the persistence of the current energy shock – an emphasis on this issue will be interpreted as a strong argument for another rate hike in December.
Market-implied ECB interest rate path (2026 - 2027)
Source: Bloomberg Finance
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