The ECB raised rates by 25 basis points as expected, and ECB President Lagarde delivered a hawkish message after the rate hike, arguing that acting now was necessary to preserve price stability amid rising inflation risks and heightened uncertainty.
She emphasized unanimous support for the decision and said the greater risk was failing to act
Lagarde noted that short-term inflation expectations have risen across several measures, while longer-term expectations remain broadly anchored near the ECB’s target. She acknowledged that inflation pressures are becoming more broad-based, partly due to higher energy prices and geopolitical tensions, but said there is still no convincing evidence of a wage-driven inflation spiral. On growth, Lagarde pushed back against recession concerns, pointing to positive growth, rising incomes, and stronger consumer purchasing power.
She stressed that the ECB remains data dependent and is not pre-committing to additional rate hikes, but made clear that policymakers remain focused on preventing inflation from becoming entrenched. Overall, the message was that inflation risks remain elevated, the ECB is prepared to act when necessary, and policymakers are not ready to become complacent simply because inflation has recently been near target. Technically, the ECB’s rate hike has done little to alter the bearish bias.