Lagarde defends rate hike, signals data-dependent policy path
ECB President Christine Lagarde defended the recent interest rate hike in a July 2 interview with Les Échos. She cited accelerating underlying inflation and robust economic data as justification for the Governing Council's decision.
Inflationary pressures persist
Lagarde stated the ECB was confident in its decision to raise key interest rates on June 11, citing confirming data.
She noted that inflation excluding energy and food accelerated from 2.2 percent to 2.5 percent, driven by services prices rising 3.5 percent against a projected 3 percent.
Monetary policy decisions were clear given rising inflation and projections of 3 percent for 2026, 2.3 percent for 2027, and 2 percent for 2028.
She also mentioned considering adverse and severe scenarios in addition to a more favorable one.
The growth forecast was only lowered by 0.1 percentage points, from 0.9 percent to 0.8 percent, with the labor market remaining robust.
Future policy and digital euro
Lagarde stated she does not know if further tightening is needed, reiterating that decisions are made at each meeting based on the inflation outlook, economic data, underlying inflation dynamics, and monetary policy transmission.
She addressed the digital euro, emphasizing its benefits for merchants (lower fees) and individuals (universal use, protection from foreign powers).
She dismissed populist claims about surveillance or programmable money as 'science fiction,' reassuring that the ECB is not seeking profit and banks would intermediate the service.
Past defended, future unclear
Lagarde robustly defends the ECB's rate hike, but offers no clear signals on future policy.
Her personal political aspirations, though hinted, add an element of leadership uncertainty.
This interview shows a leader balancing current duties with a potential future beyond the central bank.
Source: Christine Lagarde: Interview with Les Échos
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