As expected, the European Central Bank (ECB) adjusted the key interest rate upward by a quarter of a percentage point on Thursday afternoon, marking the second time this year. The key interest rate thus stands at 2.5 percent.
However, the EUR/USD currency pair is giving up some ground in return. Strong US producer price data is likely to have reinforced interest rate speculation in the US. At the same time, attention is focused on Friday's US inflation data, which is already casting its shadow ahead.
EUR/USD 
ECB raises interest rates by 25 basis points
The European Central Bank (ECB) has raised the key interest rates in the euro area, thereby increasing the deposit rate—which is important for savers and banks—from 2.25 to 2.5 percent, as the ECB Governing Council announced today at its out-of-town meeting in Berlin. In July, the ECB had left the interest rate level untouched.
"The central bank stated, "The conflict in the Middle East continues to generate inflationary pressure, and inflation is likely to remain significantly above our target for an extended period." The outlook remains "fraught with a high degree of uncertainty.".
EU inflation was 3.3 percent in August
EU inflation was 3.3 percent in August, which was significantly higher than the July figure (2.9 percent).
According to the monetary policy decision of June 11, 2026, the ECB Governing Council is aiming for an inflation rate of 2.0 percent over the medium term. In its baseline scenario, the ECB expects overall inflation to be 3.0 percent for the year 2026, 2.30 percent for 2027, and 2.0 percent for 2028. For the core inflation rate, the baseline scenario projects an average of 2.5 percent in 2026 and 2.2 percent for the two subsequent years.
Outlook: US inflation in focus on Friday
US inflation data is expected for Friday (2:30 PM), which investors are expected to scan for monetary policy clues. In this context, economists expect an August rate of 3.4 percent (compared to the same month of the previous year), following 3.4 percent in July as well.
The core inflation rate, which excludes the drivers energy and food, is estimated to stand at 2.4 percent, thus slightly lower than in July (2.5 percent).
