The European Central Bank (ECB) decided to raise benchmark interest rates by 25 basis points, in a decision described as "unanimous" and "without doubts" by Christine Lagarde. The ECB president spoke of "data dependence" at upcoming meetings, staying in line with her usual approach of not committing to future decisions.
Lagarde summarized the current eurozone situation as having stronger growth, lower inflation than expected, but more lasting. Updated macro projections point to inflation of 2.1% next year and in 2028, meaning above the central bank's medium-term target.
This upward revision of inflation projections reinforced market expectations that eurozone rates will rise again soon. Many investors were already betting on another rate hike this year, and some pointed to a new increase in early 2027. However, Lagarde rejected that these projections guarantee further rate increases, refusing to commit on next steps.
The ECB president was also confronted with statements from chief economist Philip Lane, who had suggested that the current 2.5% corresponded to the upper limit of the neutral rate range. Lagarde downplayed these considerations, arguing that the range is "a work in constant progress" and that, given the consecutive shocks affecting the European economy, she does not attach great importance to the neutral rate under current conditions.
