ECB raises rates and Brent crude holds above $100 as Middle East escalation forces central banks into a higher-for-longer inflation fight

The European Central Bank (ECB) raised its key interest rates on 10 September 2026 to address inflation driven by the Middle East conflict, which has pushed Brent crude oil prices above $100 a barrel for the first time since July 2026. ECB President Christine Lagarde faced markets seeking guidance on the future pace of tightening against a backdrop of widening conflict and continued shipping attacks. In the United States, data published on 10 September showed US producer prices rose 5.4% in the 12 months through August, and markets moved the probability of a Federal Reserve rate hike at its 15 to 16 September meeting to approximately 70%, based on Fed funds futures pricing. Analysts from Capital Economics noted the producer price data remained relatively hot, suggesting the Fed is likely to hike this year even if it does not act at the September meeting. The Bank of Japan (BOJ) is scheduled to meet the following week, with a quarter-point rate hike almost fully priced into markets. The yen had strengthened approximately 4% against the dollar in September 2026, rising to around 153 per dollar, as traders priced in a faster pace of BOJ tightening. The Bank of England is expected to leave rates unchanged at its own meeting the same week. UK GDP data published on 11 September showed the economy grew 0.4% in July, beating economist expectations of flat growth, but the improvement is likely to be overshadowed by energy-driven inflation concerns in the weeks ahead.