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Lagarde says ECB rate hike confirmed by spreading supply shock
ECB Chief Christine Lagarde said inflation excluding energy and food accelerated to 2.5%, helping justify the June decision.
Christine Lagarde said the ECB is confident its 11 June interest-rate increase remains the right call despite news of a 60-day Iran and United States ceasefire agreement reached about ten days later, according to an interview with Les Échos.
Lagarde argued the move was validated by data received since April, when she said a large majority of the ECB’s Governing Council had been prepared to decide but lacked sufficient information. She described the situation as an external supply shock spreading to the wider economy, with indirect effects already visible and second-round effects still a risk to watch.
She pointed to a firmer inflation outlook, saying inflation excluding energy and food rose from 2.2% to 2.5%. Lagarde also cited services price growth of 3.5% versus a 3.0% projection and referenced ECB inflation projections for 2026 through 2028 of 3.0%, 2.3%, and 2.0%, respectively.
On the economic side, Lagarde said the ECB only trimmed its growth forecast by 0.1 percentage points, from 0.9% in March to 0.8% in June. She added that unemployment is near a historic low, labour force participation continues to increase, and she said the financial sector is robust with well-capitalised banks and no known risk of major financial instability.