Lagarde: ECB sticks to “middle path” as inflation outlook worsens

European Central Bank (ECB) President Christine Lagarde said on Monday the bloc's economy continued to expand broadly across countries and sectors, with manufacturing and the labour market holding up well. She warned that inflation would be higher than previously expected in 2027 and 2028 but said there was no evidence yet that price pressures were becoming embedded and that a measured policy response remained appropriate.

Key Quotes

Growth was broad-based across most countries and sectors. This pattern is expected to have continued in the third quarter.

Manufacturing is performing solidly.

The labour market remains robust.

Major technological advancements have not reduced employment, but right now the verdict on AI is still out.

The outlook continues to be surrounded by high uncertainty.

We see higher inflation ahead but no signs yet that it is becoming embedded.

The inflation outlook will be higher in 2027 and 2028 than we expected a few months ago.

We remain in the “middle path” for monetary policy that I laid out earlier this year.

We view a measured response as appropriate to keep inflation in check.

This means that while the shock is too large to look through, we view a measured response as appropriate to keep inflation in check.