ECB's Lagarde defends rate hike as 'robust across three scenarios'
European Central Bank President Christine Lagarde defended yesterday's 25-basis-point rate hike as justified across three scenarios. The ECB Governing Council delivered its first rate increase since 2023, lifting the deposit rate to 3.50%.
In an exclusive Euronews interview after the Frankfurt press conference, Lagarde said: "Our scenario analysis shows that the Iran war's energy-driven inflation shock pushes prices up even with weakening demand." The ECB's baseline now sees headline inflation at 3.0% by end-2027, up from 2.4%, while core inflation stays at 2.9%.
Nineteen of the 25 Governing Council members voted for the increase. Banca d'Italia governor Fabio Panetta, Bank of Greece governor Yannis Stournaras and four other members favoured holding. Bundesbank president Joachim Nagel said in a post-vote statement: "We cannot ignore the risk of second-round effects." The ECB updated its forward guidance to a "data-dependent" framing.
The euro climbed from $1.1240 to $1.1305, while German 10-year yields rose 12 basis points. ING economist Carsten Brzeski told Euronews: "Lagarde clearly signalled another 25-basis-point step in September." The next ECB meeting is scheduled for 17 July. This is not investment advice.
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