Focus Europe

Latest edition · September 10, 2026

26 09 10 ECB Review

The ECB delivered an expected 25bp rate hike to 2.50% in September 2026 and upgraded its medium-term inflation projections, projecting core HICP at 2.3% in 2028. Deutsche Bank maintains its baseline expectation that the Governing Council will hike once more in December to reach a terminal deposit rate of 2.75%.

The ECB hiked policy rates by 25bp to 2.50% in September 2026 in what President Lagarde described as a 'no-brainer'. The policy statement leaned hawkish by highlighting that inflation will remain 'well above target for an extended period' and raising core inflation projections to 2.3% through 2028. While Lagarde avoided endorsing market pricing of terminal rates above 3% during the press conference, Deutsche Bank concludes that the burden of proof is on economic activity and inflation data to weaken rapidly to prevent another hike. Deutsche Bank expects a final 25bp hike to 2.75% in December 2026, viewing market pricing beyond 3% as difficult to justify given the absence of second-round wage effects.

Key takeaways from the latest edition

• 1.The ECB hiked rates by 25bp to 2.50% in September as expected, with communications supporting Deutsche Bank's baseline call of one more 25bp hike to a terminal rate of 2.75% in December.
• 2.Staff projections revised core HICP to 2.3% in 2028 (30bp above the 2.0% target) and introduced wording that inflation remains 'well above target for an extended period', suggesting an ECB willingness to hike into mildly restrictive territory.
• 3.President Lagarde maintained a data-dependent, meeting-by-meeting stance during the Q&A, deflecting forward guidance and avoiding endorsement of aggressive market pricing pointing to 3.40%.

What this series covers

• ECB Reaction: Not done yet
• A tale of two halves: one more hawkish, one not as hawkish
• ECB reaction function points to another hike in December
• Two-sided risks
• ECB staff macro projections
• Growth outlook: ECB turns more optimistic on near-term activity
• What has changed?
• Risks remain to the downside
• Alternative scenarios
• Inflation
• Labour market
• DB AI tool

Edition archive

• 26 09 10 ECB Review

  September 10, 2026

• 26 09 09 Focus Europe The New Abnormal Heatwaves, Droughts, EL Nino and the Economy

  September 9, 2026

• 26 09 08 Focus Europe Unsure how far the ECB will go

  September 8, 2026

• 26 09 04 ECB Preview Mark Wall

  September 4, 2026