The European Central Bank raised all three key interest rates by a quarter percentage point on September 10. The deposit facility rate reached 2.50% from September 16, while the refinancing and marginal lending rates became 2.65% and 2.90%.
The ECB said the energy shock was keeping inflation above target. Its baseline put headline inflation at 3.0% in 2026, 2.5% in 2027 and 2.1% in 2028. Growth was projected at 0.9%, 1.4% and 1.5% across those years.
A rate rise does not remove the growth problem
Our analysis: a response to inflation can tighten financial conditions while the original shock is already weighing on spending. That combination makes the reason for a rate rise as important as the size of the move.
If higher energy costs persist, businesses face a choice about how much to pass on and how much to absorb in margins. Households face a choice about which other purchases to reduce. Those responses help determine whether the initial price shock becomes broader or instead weakens demand enough to limit further pressure.
EUR/USD has two policy stories
The Federal Reserve raised its target range to 3.75%–4.00% on September 16. The US and euro-area settings therefore both moved higher that month.
| September policy decision | Setting after the decision |
|---|---|
| ECB deposit facility | 2.50% |
| Federal funds target range | 3.75%–4.00% |
The instruments differ. This is a comparison of policy settings, not a precise measure of the return from holding one currency instead of another.
The harder question for EUR/USD is how the expected paths change from here. A tighter ECB outlook could strengthen the relative-rate argument for the euro; a simultaneous shift in the Fed outlook could offset it. The two existing rate numbers cannot answer that question.
What the forecasts can tell us
The ECB's baseline describes a path back towards its inflation objective over several years, alongside continuing growth. It is conditional on how the economy develops. A more persistent shock or weaker response in demand would change the problem policymakers face.
For the next comparison, focus on changes in the assessment of inflation persistence and growth, then compare them with the Federal Reserve's October decision. That is more useful than treating September's hike as a stand-alone instruction to buy the euro.
This analysis reviews the September decisions using information checked on October 23. The macroeconomic view still needs a separate entry rule, invalidation and risk budget before it can become a trading plan.
Reporting sources
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