ECB Accounts Show Higher Long-Term Yields May Limit Need for Further Rate Hikes

European Central Bank accounts revealed that rising long-term market yields could reduce the need for additional rate increases by substituting for direct policy tightening. Policymakers unanimously supported a 25 basis point hike in September, lifting the deposit facility rate to 2.50% amid persistent energy price pressures. Headline inflation projections were revised upward to 3.0% in 2026 and 2.5% in 2027, while GDP growth forecasts were lifted to 0.9% and 1.4%, respectively. Maintaining a data-dependent, meeting-by-meeting approach, officials noted moderating wage growth, contained core inflation, and limited second-round effects.