The European Central Bank (ECB) raised interest rates by 25 basis points on Thursday, a decision Christine Lagarde classified as "unanimous and obvious." The ECB president nonetheless refused to give any hints as to whether there will be another interest rate hike before the end of the year, disappointing journalists who were awaiting signals on the future direction of monetary policy. "We are not taking a position on the direction to follow at our next meeting," Lagarde stated during the press conference held in Berlin.
The Frenchwoman explained that the reluctance to signal the next steps is due to the high level of uncertainty characterizing the current moment. "Because of that level of uncertainty, we simply cannot anticipate what exactly the next step will be," she said, referring to the multiple geopolitical changes occurring on a regular basis. "We are not focusing on the meeting and the data to bother either you, the observers, or the analysts — we do it because we find ourselves in a situation of uncertainty that can change things almost overnight," she added.
The ECB maintained its inflation projection for this year unchanged but revised upward its forecasts for the following two years. The new projections point to inflation of 3% in 2026, 2.5% in 2027, and 2.1% in 2028, whereas the previous ones, released in June, indicated 3%, 2.3%, and 2%, respectively. Lagarde reiterated that the ECB Governing Council is "determined to fulfill" the 2% inflation target.
Regarding the recent rise in euro area sovereign debt yields, Lagarde stressed that "it is not a euro-specific issue, it is happening worldwide" and is due to multiple causes. The president insisted on the separation of roles between markets and the ECB: "Markets do what they have to do — and we do what we have to do, which is to ensure price stability, defined as the 2% target over the medium term."
