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The Outlook for the
Euro Area Economy
Lecture at University of Lausanne
Philip R. Lane
Member of the Executive BoardLausanne, 24 September 2026 0
Rubric
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Developments in energy commodity price futures
Sources: Bloomberg, LSEG and ECB staff calculations.
Notes: The synthetic energy commodity price index is computed as a weighted average of oil and gas prices. In the baseline of the December 2025, March 2026, June 2026 and
September 2026 projections, the paths of energy commodity prices are implied by futures markets in the ten working days ending on the cut -off dates of 26 November 2025, 11 March
2026, 21 May 2026 and of 19 August 2026, respectively. The latest futures curves is calculated as quarterly averages of futur e monthly prices but are not smoothed over ten days. The
latest observations are for 22 September 2026.
Synthetic energy commodity price index (SECPI)
2026 2027 2028
September 2026 baseline June 2026 baseline
March 2026 baseline December 2025 baseline
Latest futures curve - cut-off 22 September
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Scenarios for energy commodity prices
Sources: Bloomberg, LSEG and ECB staff calculations.
Notes: The synthetic energy commodity price index is computed as a weighted average of oil and gas prices. In the September 2026 baseline and in the September scenarios, the
paths of energy commodity prices are implied by futures markets in the ten working days ending on the cut -off date of 19 August 2026. The latest futures curve is calculated as
quarterly averages of future monthly prices but are not smoothed over ten days. The latest observations are for 22 September 2026.
Synthetic energy commodity price index (SECPI)
(USD index) 30 40 50 60 70 80 90 100 110
2026 2027 2028
September 2026 baseline September milder scenario
September adverse scenario September severe scenario
Latest futures curve - cut-off 22 September
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-6
-4
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2026 2027 2028
Oil in euro
Taxes
Distribution margin
Refining margin
Transport fuels (STIP)
Sources: Eurostat, LSEG, Weekly Oil Bulletin and ECB calculations.
Note: Based on the short-term inflation projection (STIP) energy model
(Bańbura, M., Bobeica, E., Giammaria, A., Porqueddu, M. and van
Spronsen, J. (2025)), using Eurosystem macroeconomic projection
assumptions for the euro area, June 2026, and ECB staff
macroeconomic projection assumptions for the euro area, September
2026.
Transport fuel inflation:
model-based revisions
Consumer transport fuel inflation, crude oil prices and refining margins
Sources: Eurostat, LSEG and ECB calculations.
Note: The latest observations are for 22 September 2026.
Crude oil and refined product
prices
Sources: Eurostat, LSEG and ECB calculations.
Note: The cut-off dates for the latest observations of crude oil and
refined product futures prices used in the June and September 2026
projections are 21 May 2026 and 19 August 2026, respectively.
Refining margins 0 5 10 15 20 25 30 35 40 45
2026 2027 2028
Petrol (September 2026 projections)
Diesel (September 2026 projections)
Petrol (June 2026 projections)
Diesel (June 2026 projections)
(percentage points) (EUR per barrel) (EUR cents per litre) 3 40 60 80 100 120 140 160 180 200
02/26 04/26 06/26 08/26
Brent crude
Refined petrol
Refined diesel
Refined jet fuel
22/09/26
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Exchange rates and commodity prices
Source: ECB calculations.
Notes: Nominal effective exchange rate (NEER) denoted in euro for 17 trading partners
(NEER 17). Projections correspond to ten-day rolling averages. The cut-off for the
September projections is 19 August 2026. The latest observations are for 23 September
2026.
USD/EUR and NEER
Sources: London Stock Exchange Group (LSEG), Hamburgisches WeltWirtschaftsInstitut
(HWWI) and ECB calculations.
Note: The latest observations are for 18 September 2026 (weekly data).
Non-energy commodities
(left-hand scale: level; right-hand scale: index: 1999 = 100) (index: 2020 = 100) 90 95 100 105
1.0
1.1
1.2
1.3
01/25 06/25 11/25 04/26 09/26
USD/EUR NEER 17 (right-hand side)
1.14
99.65
September projections:
100.26
1.16 (USD/EUR)
(NEER)
23/09/26 120 130 140 150 160 170 180 190 200 210 220
01/25 06/25 11/25 04/26 09/26
Metals Food
18/09/26
201.32
175.53
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Note: Revisions are calculated based on rounded figures.
September 2026 ECB staff macroeconomic projections:
key macroeconomic variables 5
September 2026 ECB staff projections: baseline projections
Revisions vs June 2026 projectionsSeptember 2026 projections
(percentage points)(annual percentage points) 20282027202620252028202720262025
0.10.20.00.02.12.53.02.1HICP
0.1-0.1-0.20.02.32.62.32.5HICP excluding energy
0.10.10.00.02.32.62.52.4HICP excluding energy and food
-0.52.30.90.0-0.61.09.3-1.4HICP energy
0.1-0.7-0.70.02.52.81.92.8HICP food
0.10.10.1-0.13.33.33.33.8Compensation per employee
0.10.00.00.12.32.42.83.2Unit labour costs
0.00.20.1-0.21.51.40.91.3Real GDP
-0.10.10.30.01.41.21.21.1Real GDP with modified domestic demand
for Ireland
-0.10.00.20.01.31.01.01.5Private consumption
0.00.10.3-0.11.31.11.91.5Government consumption
-0.10.30.0-0.22.02.01.82.9Total investment
0.00.61.0-0.12.93.22.12.0Exports
-0.1-0.1-0.10.05.96.16.26.3Unemployment rate (% of labour force)
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Note: Revisions are calculated based on rounded figures.
September 2026 ECB staff macroeconomic projections:
key macroeconomic variables 6
September 2026 ECB staff projections: baseline projections
Revisions vs June 2026 projectionsSeptember 2026 projections
(percentage points)(Q4-on-Q4 percentage points)
Q4 2028Q4 2027Q4 2026Q4 2025Q4 2028Q4 2027Q4 2026Q4 2025
0.10.00.20.02.21.93.62.1HICP
0.10.0-0.20.02.32.52.52.4HICP excluding energy
0.10.10.00.02.32.42.62.4HICP excluding energy and food
-0.4-0.74.20.00.8-4.114.9-1.1HICP energy
0.1-0.1-1.40.02.33.11.92.5HICP food
0.10.20.0-0.23.33.43.03.6Compensation per employee
0.10.2-0.10.12.32.52.33.3Unit labour costs
0.00.00.3-0.11.51.41.21.1Real GDP
-0.1-0.10.60.01.41.31.21.2Real GDP with modified domestic demand
for Ireland
-0.1-0.10.2-0.11.31.20.71.2Private consumption
0.0-0.20.4-0.11.41.01.41.6Government consumption
-0.5-0.81.2-0.31.70.93.02.9Total investment
0.1-0.31.10.22.92.63.32.2Exports
-0.10.0-0.10.05.86.16.26.3Unemployment rate (% of labour force)
Rubric
Q1 26 Q4 26 Q3 27 Q2 28
September 2026
June 2026
March 2026
December 2025
Headline HICP inflation
Q4 28 7
Sources: Eurostat; Eurosystem staff macroeconomic projections for the euro area, December 2025 and June 2026; ECB staff macroeconomic projections for the eur o area, March and September 2026; and ECB
calculations.
Notes: Harmonised Index of Consumer Prices (HICP). The latest observations are for the second quarter of 2026.
HICP inflation
Outlook for inflation in the euro area
Energy inflation Non-energy inflation HICPX
(annual percentage points) (annual percentage points) (annual percentage points) (annual percentage points)
1.5
2.0
2.5
3.0
Q1 26 Q4 26 Q3 27 Q2 28
September 2026
June 2026
March 2026
December 2025
HICP excluding food and energy
Q4 28
-6
Q1 26 Q4 26 Q3 27 Q2 28
September 2026
June 2026
March 2026
December 2025
HICP Energy
Q4 28
1.5
2.0
2.5
3.0
Q1 26 Q4 26 Q3 27 Q2 28
September 2026
June 2026
March 2026
December 2025
HICP excluding energy
Q4 28
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08/25 10/25 12/25 02/26 04/26 06/26 08/26
Total food
Processed food
Processed food excluding tobacco
Q1 26 Q3 26 Q1 27 Q3 27 Q1 28 Q3 28
September 2026
June 2026
March 2026
December 2025
Q4 28 8
Food inflation projection and main components of HICP food
Sources: Eurostat, ECB calculations.
Note: The latest observations are for August 2026.
Main components of HICP food HICP food inflation projections
(annual percentage points) (annual percentage changes)
Sources: Eurostat; Eurosystem staff macroeconomic projections for the euro area,
December 2025 and June 2026; ECB staff macroeconomic projections for the euro area,
March and September 2026; and ECB calculations.
Note: Harmonised Index of Consumer Prices (HICP).
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1.0
1.5
2.0
2.5
3.0
04/26 06/26 08/26 10/26 12/26 02/27 04/27 06/27 08/27
ML model mean (8 September 2026)
STIP food, delta approach (8 September 2026)
September 2026 projections
Food 9
Food inflation – drivers and short-term outlook
Sources: Eurostat, Hamburgisches WeltWirtschaftsInstitut (HWWI) and ECB calculations.
Notes: The decomposition of the drivers explaining deviations in euro area food inflation
from its long-term average (calculated over the period from December 1996 to August
2026) follows Kuik, F. et al. (2024). The latest observations are for August 2026.
Drivers of euro area consumer
food price inflation
Sources: Eurostat, Eurosystem staff macroeconomic projections for the euro area, June
2026 and ECB staff macroeconomic projections for the euro area, September 2026,
Hamburgisches WeltWirtschaftsInstitut (HWWI) and ECB calculations. Notes: the machine
learning (ML) model mean refers to the mean of a new machine learning model ensemble
for food inflation (Kuik, F. et al., forthcoming). Short -term inflation projection (STIP) food,
delta approach, is the update of the Eurosystem macroeconomic projections, June 2026,
using the STIP food model (Bańbura, M. et al., forthcoming). The latest observations are
for August 2026.
Food inflation short-term outlook
(percentage point deviations and contributions)
(annual percentage changes)
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
01/25 06/25 11/25 04/26 08/26
Deviation of food inflation from its long-term average
Energy producer prices
Global food commodity prices
Euro area farm gate prices
Euro area producer prices for the food industry
Unexplained
08/26
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0.0
0.1
0.2
0.3
0.4
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2026 2027 2028
September 2026
June 2026
March 2026
December 2025
Real GDP growth projections 10
Outlook for activity in the euro area
(quarter-on-quarter percentage changes)
Sources: Eurosystem staff macroeconomic projections for the euro area, December 2025
and June 2026; ECB staff macroeconomic projections for the euro area, March and
September 2026.
Note: The chart shows the real GDP growth projections for the euro area using Modified
Domestic Demand (MDD) for Ireland.
Sources: Eurostat and ECB calculations.
Notes: The expenditure breakdown excludes Ireland. The latest observations are for the
second quarter of 2026 for GDP.
GDP growth and components
(quarter-on-quarter percentage changes and percentage points)
-0.3
-0.2
-0.1
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
Q3 Q4 Q1 Q2
Private consumption Government consumption
Investment Inventories
Net exports GDP
GDP (excl. IE) 20262025
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-2
2023 2024 2025 Q1 26
Financial wealth Housing wealth Labour income
Non-labour income Propensity to save Trend
Others Consumption
-2
2023 2024 2025 Q1 26
Euro area United States 0 10 20 30 40 50 60 70 0 3 6 9 12 15 18 21
Consump-
tion
Total
wealth
…of which
housing
wealth
…of which
financial
wealth
House
prices
Equity
prices
(right-hand
scale)
Euro area United States 11
The role of wealth in consumption growth
Consumption and wealth since the fourth
quarter of 2022
Sources: Eurostat, US Bureau of Economic Analysis, S&P 500 and DataStream.
Notes: “Equity prices” refers to the EURO STOXX 50 for the euro area and the S&P 500 for
the United States. Volumes are deflated with the consumption deflators. Housing wealth is
net of housing loans (non-housing liabilities). The latest observations are for the first quarter
of 2026.
Sources: Eurostat, US Bureau of Economic Analysis and ECB calculations.
Notes: “Others” refers to the initial conditions, transfers, error -correction term and
residuals. Effect propagates through lagged consumption. The latest observations are for
the first quarter of 2026.
Short-term drivers of consumption
(cumulative change, percentage point contributions to
cumulative change)(cumulative change, percentage point contributions to
cumulative change)
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Sources: Eurostat and the September 2026, June 2026, March 2026 and
December 2025 Eurosystem/ECB staff macroeconomic projections.
Unemployment rate
5.6
5.8
6.0
6.2
6.4
2026 2027 2028
September 2026
June 2026
March 2026
December 2025
Labour market developments
Sources: Eurostat and the September 2026, June 2026, March 2026 and
December 2025 Eurosystem/ECB staff macroeconomic projections.
Employment growth
Sources: NL Analytics and ECB staff calculations.
Notes: Indicators constructed by counting the share of sentences
appearing in earnings calls of euro area firms containing one of several
keywords synonymous with “hiring” (i.e. “recruiting”, “new hires”, “new
staff”) and “firing” (“layoffs”, “downsizing”, “restructuring”). Dashed lines
represent the averages since the first quarter of 2019 for each index.
The latest observations are for June 2026.
Indicators of hiring and firing in
earnings calls(percentage of the labour force) (quarter-on-quarter percentage changes)
(index: second quarter of 2025 = 100) 12 85 90 95 100 105 110 115 120
Q2 25 Q3 25 Q4 25 Q1 26 Q2 26
Hire
Hire: 2019 - 2026 average
Fire
Fire: 2019 - 2026 average
0.00
0.05
0.10
0.15
0.20
2026 2027 2028
September 2026
June 2026
March 2026
December 2025
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0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
2026 2027 2028
September 2026
June 2026
March 2026
December 2025
Sources: Eurostat and Eurosystem/ECB staff projections.
Note: Data refer to import volumes.
World excluding euro area imports
Trade
Source: Eurosystem/ECB staff projections.
Note: Data refer to export volumes.
Euro area exports
Source: Eurosystem/ECB staff projections.
Note: Data refer to import volumes.
Euro area imports
(annual percentage changes) (quarterly percentage changes) (quarterly percentage changes) 13
-0.6 0
0.6
1.2
1.8
2.4
2026 2027 2028
September 2026
June 2026
March 2026
December 2025
-0.3 0
0.3
0.6
0.9
1.2
2026 2027 2028
September 2026
June 2026
March 2026
December 2025
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Sources: Eurostat, Trade Data Monitor and ECB staff calculations. Notes:
RoW is rest of world excluding the euro area and United States. Share in
2023 refers to the share of these imports/exports in total imports/exports
of the respective country or region. "AI -related trade" is a basket of goods
related to the construction and operation of AI data centres (Emter et al.,
2026; Waugh, 2026). "Other AI-related goods" refers to upstream AI
goods and broad industrial goods used in AI production. The latest
observations are for 2025.
Trade in AI goods and price pressures from rising prices for AI goods
Sources: Trade Data Monitor, ECB and ECB staff calculations.
Notes: “AI goods” is a basket of goods related to AI data centre
construction (Emter et al. 2026; Waugh, 2026). Unless indicated, prices
are in USD. “Asia – AI exporters” includes HK, IN, ID, MY, SG, KR, TW,
TH, PH. The latest observations are for May 2026 for EA, June 2026 for
US and Global and July 2026 for CN and Asia.
Import prices of AI goods
Sources: Trade Data Monitor, US Bureau of Economic Analysis (BEA),
Eurostat and ECB staff calculations.
Notes: “AI goods” is a basket of goods related to AI data centre
construction (Emter et al. 2026
; Waugh, 2026). Based on US BEA tables
(2017). Exposures weighted by AI share, based on 2025 nominal trade
data.
HICP exposure to AI goods 0 1 2 3 4 0 4 8 12 16
Phones Photo
equipment
Computers New
cars
All
items
Indirect use of AI goods
Direct use of AI goods
Euro area HICP weight (right-hand scale)
(annual percentage changes, 3-month moving
averages)
(left-hand scale: percentage of output;
right-hand scale: percentage of HICP) 14
Trade in AI-related goods and
subcomponents
(percentage of total trade; annual growth, percentage)
Exports Imports Exports Imports
EA 9.6 10.9 6.7 9.9
US 12.5 12.3 11.5 34.6
RoW 14.4 14.1 19.4 16.8
EA 3.6 5.0 11.7 16.2
US 6.6 7.1 22.4 55.7
RoW 8.7 8.1 26.0 23.6
EA 4.4 4.7 4.5 5.4
US 3.7 4.1 -5.2 -0.6
RoW 3.9 4.1 6.9 5.9
EA 1.6 1.1 2.6 -1.8
US 2.2 1.1 -1.2 -2.1
RoW 1.8 2.0 8.6 8.2
Infrastructure AI goods
Other AI-related goods
Share in 2023 Growth 2024-2025
Total AI-related trade
Core AI goods
01/25 04/25 07/25 10/25 01/26 04/26 07/26
China Euro area
Euro area (EUR) Asia - AI exporters
United States Global
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Fiscal developments – deficit and stance
Sources: September 2026 ECB staff macroeconomic projections, June 2026 Eurosystem
staff macroeconomic projections, March 2026 ECB staff macroeconomic projections and
December 2025 Eurosystem staff macroeconomic projections.
Budget deficit
Sources: September 2026 ECB staff macroeconomic projections, June 2026 Eurosystem staff
macroeconomic projections, March 2026 ECB staff macroeconomic projections and December
2025 Eurosystem staff macroeconomic projections.
Notes: The fiscal policy stance is measured as the change in the cyclically adjusted primary
balance. The figures shown are adjusted for the fact that revenues from grants under the Next
Generation EU (NGEU) programme are not withdrawn from the domestic economy. A negative
(positive) figure implies a loosening (tightening) of the fiscal stance.
Fiscal stance
(percentage of GDP) (percentage of GDP)
3.0
3.1
3.2
3.3
3.4
3.5
3.6
3.7
2026 2027 2028
December 2025 projections March 2026 projections
June 2026 projections September 2026 projections
-0.6
-0.5
-0.4
-0.3
-0.2
-0.1
0.0
0.1
0.2
0.3
0.4
2026 2027 2028
December 2025 projections March 2026 projections
June 2026 projections September 2026 projections
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Fiscal developments – government consumption and public investment
Sources: September 2026 ECB staff macroeconomic projections, June 2026 Eurosystem
staff macroeconomic projections, March 2026 ECB staff macroeconomic projections and
December 2025 Eurosystem staff macroeconomic projections.
Real government consumption
Sources: September 2026 ECB staff macroeconomic projections, June 2026 Eurosystem
staff macroeconomic projections, March 2026 ECB staff macroeconomic projections and
December 2025 Eurosystem staff macroeconomic projections.
Real government investment
(annual percentage changes) (annual percentage changes)
0.8
1.0
1.2
1.4
1.6
1.8
2.0
2026 2027 2028
December 2025 projections March 2026 projections
June 2026 projections September 2026 projections
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
2026 2027 2028
December 2025 projections March 2026 projections
June 2026 projections September 2026 projections
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1.6
2.0
2.4
2.8
3.2
3.6
4.0
4.4
08/26 04/27 12/27
Fixings (latest)
HICP September
2026 projections
12/27
1.6
1.7
1.8
1.9
2.0
2.1
2.2
2.3
01/26 05/26 09/26
Inflation risk premium
component
Expectation component
5y5y ILS fitted rate
22/09/26
1.5
2.5
3.5
4.5
01/26 03/26 05/26 07/26
Perception of past inflation
Inflation expectations one year ahead
Inflation expectations three years ahead
Inflation expectations five years ahead
Headline HICP
08/26
Sources: ECB Consumer Expectations Survey (CES) and ECB
calculations.
Notes: Median perceptions/expectations from the CES using survey
weights. The latest observations are for August 2026.
Consumer inflation expectations
in the CES
Inflation expectations
Source: Survey of Monetary Analysts (SMA).
Note: "Interquartile range" refers to point forecasts of SMA respondents.
"MPE" refers to the ECB staff macroeconomic projections.
SMA HICP and HICPX inflation
expectations
Sources: Bloomberg, LSEG, ECB projections database and ECB calculations.
Notes: The left panel shows the latest quarterly inflation path derived from
inflation fixing contracts referring to HICPxT and the September quarterly MPE
projections for HICP. Right panel decomposes the 5-year forward inflation-
linked swap (ILS) rate 5 years ahead into an inflation risk premium and an
expectation component, which are averages from two affine term structure
models (see Joslin, Singleton and Zhu (2011)
and Burban et al. (2022)). The
latest observations are for 22 September 2026.
Euro area inflation path and 5y5y
ILS decomposition
(annual percentage changes) (annual percentage changes) (percentages per annum) 17
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1.5
2.0
2.5
3.0
3.5
4.0
4.5
09/26 03/27 09/27
Realised €STR
€STR forward curve (pre-July GovC)
€STR forward curve (latest)
€STR forward curve adjusted for term premia (latest)
Option-based 15th and 85th percentiles
31/12/27 18
Forward curve and risk-free rates
Sources: LSEG and ECB calculations.
Notes: Surveys are adjusted for the latest €STR vs. DFR spread. Risk -neutral percentiles are
derived from 3-month Euribor options. Premia-adjusted estimates are based on three models
(two variations of Joslin et al. (2011), with and without surveys, and one following Geiger and
Schupp (2018. “Pre-July GovC” refers to 22 July 2026. The latest observations are for 22
September 2026.
Sources: LSEG, Bloomberg and ECB calculations.
Notes: the term premium and expectations decompositions are based on models following
Joslin et al. (2011)
with and without surveys, and Geiger and Schupp (2018). The real rate
component is the OIS rate minus the corresponding inflation- linked swap rate. “Change
since January 2026” refers to change since 30 December 2025. The latest observations
are for 22 September 2026.
Decomposition of changes in
euro area overnight index swap (OIS) rates
(basis points)
€STR forward curve
(percentages per annum) 0 10 20 30 40 50 60 0 10 20 30 40 50 60 0 10 20 30 40 50 60
10-year 30-year10-year
Inflation component
Real rate componentTerm premium component
Expectations component
Change since January 2026
Rubric
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Sources: Bletzinger, Martorana and Mistak (2026, lhs), Allayioti, Di Casola
and Magistretti (2026) and ECB calculations.
Notes: The ECB-BIG index uses a BVAR model with mixed-frequency.
"Price components" includes lending rates and the MF-FCI; "Quantity
components" includes credit volumes and ECB Bank Lending Survey data.
Changes refer to 30 December 2025 (Macro-Finance FCI) and December
2025 (ECB-BIG) to latest. The latest observations are for 16 September
2026 (Macro-Finance FCI) and September 2026 (ECB -BIG).
Euro area Macro-Finance FCI and
ECB-BIG index since January 2026
Financing conditions
Sources: LSEG, Bloomberg and ECB calculations.
Notes: Term premia and rate expectations are estimated by two affine
term structure models (both variations of
Joslin, Singleton and Zhu,
(2011), with and without survey information), and a lower bound term
structure model following Geiger and Schupp (2018). The latest
observations are for 22 September 2026.
Decomposition of
ten-year euro area OIS rates
Sources: Bloomberg and ECB calculations
Notes: “end of 2025" refers to 30 December 2025. The latest
observations are for 22 September 2026.
Changes in OIS forward rates
(index) (percentages per annum)
(basis points) 19
Quantity
components
Price components
-0.6
-0.4
-0.2
0.0
0.2
0.4
0.6
0.8
1.0
Real rates Long rate
Short rate Risk assets
FX
-0.06
-0.04
-0.02
0.00
0.02
0.04
0.06
0.08
0.10Macro-Finance FCI ECB-BIG
Changes since January 2026
Macro-
Finance FCI
TighterLooser
ECB-BIG
Sovereign
spreads 0 20 40 60 80 100 120 140
1y1y 1y2y 1y4y 1y9y
Changes since end of 2025
2020 2021 2022 2023 2024 2025 2026
Term premia component
Expectations component
Fitted ten-year OIS rate
22/09/26
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Composite bank
lending rate
Loans up to 1
year
Loans over 1
year and up to 5
years
Loans over 5
years
Changes from December 2025 to July 2026
Sources: ECB (balance sheet items, MFI interest rates, Centralised
Securities Database, Money Market Statistical Reporting), IHS Markit
iBoxx and ECB calculations.
Notes: Composite funding costs weigh new business rates of each
component by outstanding amounts. The latest observations are for July
2026 (bars) and 18 September for the latest bank bond yields and
interbank rate (diamonds).
Bank funding costs
Bank funding costs and lending rates
Changes in firms' costs of
financing
Changes in bank lending rates to
households for house purchase(basis points changes)
(basis points) (basis points) 20
Sources: ECB (MFI interest rates), Bank of America Merrill Lynch and
ECB calculations.
Notes: Composite bank lending rates are calculated by aggregating short
and long-term rates using a 24-month moving average of new business
volumes. The latest observations are for July 2026 (bars) and 18
September for the latest cost of market -based debt (diamond).
Sources: ECB (MFI interest rates) and ECB calculations.
Notes: Composite bank lending rates are calculated by aggregating short
and long-term rates using a 24-month moving average of new business
volumes. The latest observations are for July 2026.
Composite
funding
costs
Overnight
deposits
Redeem-
able at
notice
deposits
Time
deposits
Bank
bond
yields
Interbank
rate
Changes from December 2025 to July 2026
Changes from December 2025 to latest
Composite
bank
lending
rate
Loans up
to 1 year
Loans
over 1
year and
up to 5
years
Loans
over 5
years
Cost of
market-
based
debt
Cost of
debt
financing
Changes from December 2025 to July 2026
Changes from December 2025 to September 2026
Rubric
www.ecb.europa.eu©21
Model-based impact of changes in financial conditions on the outlook
Sources: ECB and Eurosystem staff calculations
Notes: The chart shows the 2026-2028 cumulative impacts of successive revisions to
market-based expectations of short-term rates and ten-year government bond yields
between the cut-off dates for the December 2025 and September 2026 staff projections
according to elasticities from Eurosystem staff projection models and the ECB-BASE
model. Impacts include the endogenous response of the exchange rate to changes in
interest rates according to the ECB-BASE model.
Cumulative impacts of changes in short
and long-term interest rates 2026-2028
-0.9
-0.8
-0.7
-0.6
-0.5
-0.4
-0.3
-0.2
-0.1
0.0
Eurosystem
projection
models
ECB-BASE Eurosystem
projection
models
ECB-BASE
Real GDP growth HICP inflation
December 2025 projections to September 2026 projections
Sources: ECB calculations using the MMR model (see Mazelis et al., op. cit.) and Macro-
Finance FCI (see Bletzinger et al., 2026). Notes: This chart shows the simulated impacts of
revisions to expected short-term interest rates between the cut -off dates for the December
2025 and September 2026 staff projections (for the MMR), and of the change in the Macro-
Finance FCI between the December 2025 cut-off date and 16 September 2026. Reported
values are the sum of the annual-average impacts on year-on-year growth rates in 2026, 2027
and 2028, expressed in percentage points. The latest observations are for 19 August 2026 for
short-rate expectations and 16 September 2026 for the Macro -Finance FCI.
Impact of monetary policy and financial
condition tightening 2026-2028
-1.4
-1.2
-1.0
-0.8
-0.6
-0.4
-0.2
0.0
MMR
unexpected
MMR
expected
FCI MMR
unexpected
MMR
expected
FCI
Real GDP growth HICP inflation
December 2025 projections to latest
(percentage point impact on annual growth rates) (percentage point impact on annual growth rates)