PolicyMarket noteThursday 8 October 2026, 23:14
ECB minutes: a unanimous rate rise, and no promise of another
The ECB minutes for September show every member backed the rise to 2.50% and saw inflation risks to the upside, but they chose to promise nothing for October.
By The Notebook Desk
The ECB minutes for September show a united Governing Council that chose to keep its next step open. Every member supported the proposal to raise the three key interest rates by a quarter of a point, the account of the 9–10 September meeting says. The account, the European Central Bank’s version of minutes, was published on Thursday.
The same members agreed that their message should give nothing away. Communication “should remain neutral”, the account says, “neither suggesting that the current decision was another step in a predetermined tightening cycle nor that it was the last rate hike.”
That leaves the next meeting, on 29 October, open. Markets do not expect a move there. Prices in the euro money market gave a 92% chance that rates stay where they are, on data to 7 October, according to Central Bank Watch. They price about 69bp of rises in total over the next nine meetings.
Why the ECB raised rates in September
The September decision took the deposit rate to 2.50%, its second rise this year after June. The case for it was energy. Members “largely agreed that the inflation outlook had deteriorated”, as the war in the Middle East and Russia’s war against Ukraine pushed the path of energy prices higher.
The staff projections presented at the meeting see headline inflation averaging 3.0% this year, 2.5% in 2027 and 2.1% in 2028. Core inflation, which leaves out energy and food, is forecast at 2.5%, 2.6% and 2.3%. That keeps it above the 2% target for the whole period.
All members saw the risks to those numbers as being to the upside. Gas prices had risen 17% since the July meeting, to €73 per megawatt hour, and storage was low going into the winter. Gas could rise further, the account warns, with more supply disruptions or “an unusually cold winter”.
Members also judged that the economy could take a higher rate. Staff expect growth of 0.9% this year, 1.4% in 2027 and 1.5% in 2028. A deposit rate of 2.50%, they noted, “remained in the range of neutral interest rates estimated by staff”: the level that neither speeds up nor slows down the economy. In other words, the ECB does not yet think its policy is tight.
The case for going slowly
Not every view in the room pointed the same way. It was suggested that higher market rates, a stronger euro, weaker mortgage activity and pressure on lower-income households showed that financial conditions “were already restraining parts of demand”. The account also notes that AI investment in the euro area is “heavily dependent on credit and sensitive to interest rates”.
Food was argued over too. Some members pointed to heatwaves, droughts and a strong El Niño as risks to food prices next year. Others replied that the staff forecast already had a big rise in food inflation built in.
Wages were calm. Negotiated wages grew 2.4% in the second quarter, and staff expect only a small pick-up, to 2.7%, in the first half of 2027. Second-round effects, where higher prices feed into higher wages and then into prices again, “had not been seen”, the account says.
What has happened since the meeting
Inflation has since moved the way the account warned it might. Prices in the euro area rose 3.8% in the year to September, up from 3.2% in August, according to Eurostat’s flash estimate. Energy prices were 18.8% higher than a year earlier. Core inflation rose only to 2.5%, from 2.4%, as we reported on 2 October.
That split is the ECB’s problem in one line. Headline inflation jumped after the meeting, but the measure that tells the ECB whether energy is spreading to other prices has barely moved.
What to watch next
The Governing Council meets next on 29 October. Members said they would watch for “indirect effects” of energy on other prices and for second-round effects, which could make the energy shock “more persistent”. Core inflation in the October figures, and any rise in wage settlements, will matter more than the headline rate.
The account shows a central bank that is ready to raise rates again but does not want to be pushed. Markets currently think it will wait in October. A third rise this year would need core inflation to start following energy up.
Disclosure
This is analysis and opinion, not investment advice.