ECB account of September: unanimous hike to 2.50%, energy shock lasting longer
Victoria Shinder2 min readThe European Central Bank published on 8 October the account of the Governing Council's 9–10 September meeting, at which it raised its three key rates by 25 basis points. The account shows the decision was unanimous and that the Council's concern had shifted from the size of the energy shock to its duration.
The decision. Chief economist Philip Lane proposed raising the deposit facility rate from 2.25% to 2.50%, calling it "a robust decision across a wide range of scenarios". All members supported it. The Council kept its meeting-by-meeting approach "without a pre-commitment to any particular rate path".
Why. Lane told the meeting that six months on, the energy shock from the Middle East conflict was generating persistent pressure: oil at $97 a barrel, European diesel crack spreads above $70 a barrel — more than three times pre-war — and gas at €73/MWh, 17% higher than at the July meeting. Euro-area HICP inflation rose to 3.3% in August from 2.9%, with energy at 14.3%. September staff projections put headline inflation at 3.0% in 2026, 2.5% in 2027 and 2.1% in 2028, revised up for 2027 and 2028; growth was revised up to 0.9% and 1.4% for 2026 and 2027. All members saw inflation risks tilted to the upside, citing gas prices since the projection cut-off and low European storage ahead of winter.
What markets expected. Isabel Schnabel reported that markets fully priced the September hike and 84 basis points of hikes by end-2027, up from 64 at the July meeting, with the expected terminal rate above 3% for the first time in this cycle. Analysts in the ECB's survey expected only a final hike in September.
The debate inside. Some members argued the shock could fade as fast as it came — it is politically driven, prices tracked US-Iran negotiations, and renewables now cover around half of EU gross electricity consumption. Others stressed demand from AI investment and fiscal policy alongside the supply shock. On credit, members noted firms borrowing partly to cover higher input costs and households borrowing to cope with living costs — growth in lending, but not a healthy sign. Wage indicators show no material second-round effects yet; five-year-ahead household inflation expectations reached 2.5% in August, the highest since the survey began.
Read-across. The account confirms a Council united on direction and still undecided on persistence.
Source: ECB, "Account of the monetary policy meeting of the Governing Council, 9-10 September 2026", published 8 October 2026 — https://www.ecb.europa.eu/press/accounts/2026/html/ecb.mg261008~a10153d090.en.html