Lagarde backs measured rate rises as energy drives inflation

The Governing Council raised key rates by 25 basis points in September after an equal June increase.

Lagarde said the energy shock required a response, but energy pass-through to prices and wages had not exceeded projections.

Higher long-term rates had tightened financing, restraining growth and pass-through.

Decisions depend on the inflation outlook, underlying inflation and policy transmission.

September core inflation reached 2.5 percent.

The ECB sees headline inflation above target into the first half of 2027, returning near target toward year-end.

September projections put growth at 0.9 percent in 2026, 1.4 percent in 2027 and 1.5 percent in 2028.

Lagarde cited downside growth risks from the Middle East conflict and urged temporary, targeted and tailored energy relief.

More than 30 central banks expressed interest in the enhanced Eurosystem repo facility, EUREP, over six months; the Council agreed operational features and onboarding in July.

A 12-month internal digital euro pilot will start in the second half of 2027, requiring adoption of its regulation by end-2026.

Pontes, the Eurosystem's distributed ledger settlement solution, went live on September 21. Appia will develop a tokenised ecosystem blueprint with common standards, shared infrastructure and European governance.

Lagarde also welcomed three completed International Monetary Fund reviews.