The ECB leaves rates unchanged at 2.50%. Lagarde: "Inflation is likely to increase"

On the day of the announcement of Christine Lagarde's resignation as president of the European Central Bank (from 7 February 2027), the Frankfurt institute met its board for a new decision on interest rates. As expected by analysts, the decision was made to pause on increases after the deposit rate was raised to 2.50% in September. The one on main refinancings remains at 2.65%, the one on marginal loans at 2.90%. Since the last meeting, explains the ECB, "financing conditions have tightened and it is likely that this will impact inflation and growth". A possible new increase is more likely during the December meeting. The objective is always to bring inflation back to 2%. It is currently at 3.8% in the Eurozone, with Eurostat data updated in September. In August it was at 3.2%.

Lagarde underlines how European growth "continued in the third quarter" of the year, but the war scenario in the Middle East and the conflict in Ukraine continue to weigh on the future. At the center of concern are always energy prices, which "make an increase in inflation likely in the coming quarters". In today's meeting, he adds, an increase was discussed, but then "on the basis of the current uncertainty, and underlying inflation, which is roughly unchanged", the ECB "decided unanimously that it was well positioned, to keep rates steady and that a measured approach was the right one".

The situation in France is also having an impact, where government bond yields have risen to their highest since 2002, with investors demanding increasingly higher premiums to lend them money. The French political crisis and social protests are weighing on the government's ability to find the right framework for approving the budget for 2027: a majority must be found for the measures necessary to reduce the deficit. To those who ask her about the turbulence in French government bonds, Lagarde - without mentioning Paris - replies that "some member countries face a particular challenge, those with high levels of debt in general" and "if market developments threaten a smooth transmission of monetary policy, including unjustified and disorderly market movements, we have the tools to respond".