ECB Set to Raise Rates to 2.5% in September, Economists Say

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ECB Set to Raise Rates to 2.5% in September, Economists Say

The European Central Bank is widely expected to raise its deposit rate by 25 basis points to 2.5% at its September meeting, according to a Reuters poll of economists. The move, if confirmed, would mark another step in the ECB’s efforts to curb inflation while balancing risks to economic growth.

What the Reuters Poll Shows

The survey, conducted in early September, indicates that a majority of economists anticipate a quarter-point hike, bringing the deposit facility rate to its highest level since 2001. The decision is scheduled for September 14, 2025, following the ECB’s summer break.

According to the poll, most respondents see the September hike as the last in the current cycle, with a terminal rate of 2.5% expected by year-end. However, a minority of economists do not rule out further tightening if inflation remains sticky.

Why This Matters for Markets and Borrowers

The expected hike reflects the ECB’s ongoing battle against inflation, which, while cooling, remains above the 2% target. Higher rates typically translate into more expensive borrowing for households and businesses, affecting mortgages, corporate loans, and government debt servicing.

For the eurozone economy, the rate increase could dampen consumer spending and investment, but it also signals the ECB’s commitment to price stability. Investors will closely watch the accompanying statement and President Christine Lagarde’s press conference for clues on future policy direction.

Impact on Euro and Bonds

The euro has strengthened in recent weeks on expectations of a hawkish ECB, and a 25 bps hike could provide further support. Meanwhile, bond yields in the eurozone have already priced in the move, with the German 10-year Bund yield hovering near multi-year highs.

What to Expect After September

Looking ahead, economists are divided on whether the ECB will pause or continue hiking. Some argue that the full effects of previous rate increases have yet to materialize, while others point to persistent wage growth and services inflation as reasons for caution.

As of September 2025, the ECB’s key rates stand at 2.25% for the deposit facility and 2.50% for the main refinancing operations. A further hike would narrow the gap between the two, potentially altering the corridor system.

Conclusion

The ECB’s anticipated 25 bps hike to 2.5% in September underscores its resolve to tame inflation. While the move is largely priced in, the future path remains uncertain, with data dependency guiding policy. For households and businesses, the era of cheap money is clearly over, and borrowing costs are set to stay elevated for the foreseeable future.

FAQs

Q1: When will the ECB announce its September rate decision?
The decision is scheduled for September 14, 2025, following the ECB’s monetary policy meeting.

Q2: What is the current ECB deposit rate?
As of September 2025, the deposit facility rate stands at 2.25%, and the main refinancing rate at 2.50%.

Q3: Will this be the last rate hike in the cycle?
Most economists polled by Reuters expect this to be the final hike, but a minority see potential for further tightening if inflation does not cool sufficiently.

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