ECB Raises Key Interest Rates: What Does Today’s Decision Mean for Montenegro?

10/09/2026

The Governing Council of the European Central Bank (ECB) decided today to raise its three key interest rates by 25 basis points, i.e. 0.25 percentage points. Following this decision, the interest rate on the deposit facility has been increased to 2.50%, the rate on the main refinancing operations to 2.65%, and the rate on the marginal lending facility to 2.90%.

According to the ECB, the conflict in the Middle East continues to generate inflation pressures, and inflation is set to remain well above 2% target for an extended period. Today’s decision underscores the Governing Council’s commitment to setting monetary policy to ensure that inflation stabilises at its 2% target in the medium term.

At the same time, the ECB’s new projections point to the resilience of the euro area economy, but also to more persistent inflationary pressures. Average inflation is projected at 3.0% in 2026, 2.5% in 2027 and 2.1% in 2028, while real GDP growth is expected to stand at 0.9%, 1.4% and 1.5%, respectively, over the same period. The ECB assessed that the economic outlook remains characterised by a high degree of uncertainty, with upside risks to inflation and downside risks to economic growth.

“Decisions by the European Central Bank are important for Montenegro and have an impact on the country’s economic conditions, as we use the euro as legal tender. Although the CBCG does not participate in these decisions, it is our responsibility to monitor how they affect citizens, businesses and the domestic economy, and to communicate their effects to the public,” said CBCG Governor Dr Irena Radović.

Changes in the ECB’s key interest rates may gradually affect financing conditions in Montenegro, but their impact is neither direct nor automatic. Interest rates in the domestic market depend on a range of factors, including the supply of and demand for credit, banks’ funding sources, their liquidity, market competition, banks’ business policies and overall economic conditions in the country.

It is also important to note that the prevailing share of loans in Montenegro is contracted at fixed interest rates. According to data from the CBCG Credit Registry, loans with variable interest rates account for only 6.12% of total loans. Consequently, only a relatively small proportion of existing loans is directly exposed to changes in the ECB’s market reference interest rates.

The way Montenegrin banks are funded provides an additional degree of stability. At the end of July 2026, deposits from households and businesses amounted to 6.21 billion euros and accounted for 88.55% of banks’ total liabilities, excluding capital. Deposits are therefore by far the dominant source of funding for domestic banks, meaning that their funding costs are not directly linked to changes in the ECB’s key interest rates.

In view of the above, and based on the currently available CBCG data and analyses, the latest increase in the ECB’s key interest rates is not expected to have a significant immediate impact on domestic interest rates. The effects may, however, be transmitted gradually, with their intensity depending on a range of domestic and external factors.

Interest rates in Montenegro have been on a downward trend for more than two years. The ECB’s latest decision could, with a certain time lag, contribute to a slowing of this trend, but no sudden change in domestic interest rates is expected.

Montenegro’s banking sector remains sound, well capitalised and liquid, strengthening its resilience to changes in conditions in international financial markets.

“For citizens, the most important point is that an increase in the ECB’s interest rates does not automatically mean an increase in their loan instalments. The share of variable-rate loans in Montenegro is low, while our banks are mainly funded by deposits from households and businesses. The CBCG will closely monitor further developments and their potential impact on the cost of borrowing and savings,” Governor Radović emphasised.

Further trends in the ECB’s interest rates will depend on its assessment of incoming economic and financial data. The ECB Governing Council takes decisions on the level of its key interest rates at its regular meetings, based on the latest data on inflation, economic and financial developments, as well as the effects of previously adopted monetary policy measures.

Given the importance of euro area monetary policy for Montenegro’s euroised economy, the CBCG will continue to closely monitor the ECB’s decisions and communicate what they may mean for citizens, businesses and Montenegro’s financial system.