The European Central Bank raised its key interest rates by 25 basis points at its September 2026 meeting, as widely expected, marking its second hike since the US-Iran war began. With inflation remaining well above the 2% target, the ECB highlighted upside risks from the ongoing conflict. The main refinancing rate was raised to 2.65%, while the deposit rate increased to 2.50%. The ECB kept its 2026 inflation forecast at 3.0% but revised projections higher for 2027 and 2028, to 2.5% and 2.1%, respectively. Growth forecasts were upgraded to 0.9% for 2026 and 1.4% for 2027, reflecting greater-than-expected resilience in the euro area economy, while the 2028 forecast remained unchanged at 1.5%. Investors are now focusing on President Christine Lagarde’s press conference for further clues on the future path of monetary policy.