The president of the BCE (European Central Bank), Christine Lagardestated this Thursday (11) that the decision of the BC of euro zone to increase interest rates by 25 basis points was based on inflationary pressures from the Middle East war and predictions of how the energy shock is likely to affect the European bloc.
In a press conference after the decision, This was the first increase in interest rates since September 2023.
According to her, the risks to the growth outlook are tilted to the negative side, while the inflation expectations are high.
“We will closely monitor the size and persistence of the energy shock,” emphasized the ECB president, adding that the conflict is
Lagarde explained that research points to a slowdown, especially in services, and that demand for work has cooled even further.
According to the ECB president, domestic demand should be weaker than seen in March, but with . “Wage indicators continue to indicate a reduction in labor costs in 2026,” he added.
Spread
Lagarde also stated that the inflation in the euro zone is beginning to spread across different sectors of the economy, in a sign that the shock caused by rising energy prices may be
“We are starting to see an increase in inflation across the economy,” said Lagarde.
According to the director, the monetary authority expects inflation to return to the 2% target only in the autumn of 2027 in the Northern Hemisphere, reflecting the persistence of inflationary pressures observed after the escalation of the conflict between the United States, Israel and Iran.
Defense of the decision
Lagarde defended the announced decision, classifying it as a “good decision”. In the assessment of the ECB president, the main risk for the economy and price stability would be precisely not having promoted monetary tightening.
“The main risk of today’s decision was not making the decision we made,” he said.
Despite the deterioration of the region’s economic prospects, Lagarde demonstrated confidence in families’ consumption capacity in the coming years.
A net income of workers should remain positive, which leads us to believe, in the manager’s assessment, that consumption continues to be one of the main drivers of eurozone growth.
