ECB hikes key interest rates to 2.5% to combat inflation amid Middle East risks
The European Central Bank raised its key deposit rate by 25 basis points to 2.5% from 2.25%, marking its second rate hike since geopolitical tensions emerged. The hike reflects efforts to counter persistent inflationary pressures from the Middle East conflict.
The ECB voted to raise its key deposit rate to 2.5% from 2.25%, a move widely expected by investors. This marks the second rate hike since the US-Iran war began, signaling the central bank's determination to combat inflation. The main refinancing operations rate now sits at 2.65% as of mid-September 2026.
The ECB's decision comes despite uncertainty around energy shocks and geopolitical risk. The bank kept its 2026 inflation forecast at 3.0% but revised projections higher for 2027 and 2028, to 2.5% and 2.1% respectively. The deposit facility rate sets the floor for euro-area money-market rates, and therefore for Euribor, to which many loans and mortgages are tied.
What this means for expats
If you're taking out a mortgage or refinancing soon, expect variable-rate offers to become more expensive. Euribor-linked mortgages will adjust upward over the coming months. Renters with interest-sensitive deposits or savings will see slightly better returns on savings accounts, but borrowing costs—for everything from car loans to personal credit—will tick up. Expats locked into fixed rates are protected; those with variable rates should consider locking in before the next potential hike.
Sources
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