To address inflationary pressures stemming from the energy shock, the Governing Council of the European Central Bank (ECB) unanimously decided on a second key interest rate hike of 25 basis points this year. The institution's President, Christine Lagarde, emphasized after the two-day meeting that although recent data has brought some surprises, the bank will continue to act on a "meeting-by-meeting" basis without making pre-commitments regarding future interest rate trajectories. At the same time, liquidity in the system was reduced from 4.7 trillion to 2.1 trillion euros.
At the heart of the updated macroeconomic forecasts lies a combination of greater-than-expected economic resilience and persistent inflation. The eurozone economy is showing stability, with growth projected at 0.9% in 2026, 1.4% in 2027, and 1.5% in 2028. Meanwhile, the ECB expects average inflation of 3% for 2026, 2.5% for 2027, and 2.1% for 2028. For inflation excluding energy and food, expectations are 2.5%, 2.6%, and 2.3% respectively. "We have these two phenomena: greater resilience and better adaptation of the economy, as well as lower but more persistent inflation," Lagarde summarized.
Data for August shows an acceleration in annual inflation to 3.3%, up from 2.9% in July, primarily due to the energy sector. Although food inflation remains low (1.2%), the Governing Council expects it to accelerate in the event of a prolonged energy shock. So far, there has been no significant reaction in wages, with compensation per employee growing by 3.3% in the second quarter following 3.5% in the first, while productivity is gradually improving, helping to slow unit labor costs. Lagarde clarified that markets are adapting on their own to the global rise in bond yields, noting: "Markets are doing what they have to do, and we are doing what we have to do."
During the press conference, key issues regarding the future of Europe were also addressed:
- The digital euro is seen as a necessity for European sovereignty and the security of payment infrastructure.
- Lagarde described proposals in countries like France to write off government debt as a "bad idea" and "dangerous," recalling the prohibition on monetary financing under the Treaty on the Functioning of the EU.
- Despite the rise of political forces questioning the euro, support for the currency among the Union's citizens is at an all-time high of 82%.
In the context of political debates, especially following recent local elections in Germany, specifically in Saxony-Anhalt, Bundesbank President Joachim Nagel warned that radical concepts could drive away foreign investors and harm Germany's values. For its part, the ECB remains focused on price stability and has called for deep structural reforms, harmonization of the single market, and the completion of the Savings and Investment Union to ensure the resilience of the eurozone in the medium term.