The ECB leaves interest rates unchanged. Lagarde: “You won’t be rid of me before 2027”

Today, the Governing Council of the European Central Bank (ECB) decided to leave the three key interest rates unchanged: the deposit rate remains at 2.25 per cent, the main refinancing rate at 2.40 per cent and the marginal lending rate at 2.65 per cent. This pause had already been priced in by the markets and follows the 25-basis-point rise. “It was a unanimous decision, but I would like to point out that some governors wondered whether we should have considered a rise – in other words, increasing the three interest rates at this meeting,” said ECB President Christine Lagarde, responding to questions from the press. “We have thoroughly examined the data and current developments and have all unanimously decided that we are well-positioned to wait and observe very closely how the situation evolves and the data we will receive in the coming weeks.” Ahead of the September meeting, the ECB will receive two monthly inflation figures, quarterly GDP figures, two surveys on consumer expectations, a figure on earnings per employee and two PMI indices. 

“This captain will remain on board the ship; you won’t be rid of me before 2027,” when her term of office expires. This was Lagarde’s response to those who asked her about an early departure – a possibility that Lagarde herself appeared to have suggested in recent weeks in the context of the French presidential campaign, which will, in any case, take place in 2027. “You can speculate and write whatever you like. I don’t think it’s particularly interesting or important. What matters is implementing the right monetary policy to ensure price stability,” she concluded.

In June, inflation in the Eurozone fell to 2.8 per cent from 3.2 per cent in May, but the ceasefire collapsed in early July and the resumption of conflict in the Gulf, together with yesterday’s attacks by the Houthis on Saudi cargo ships in the Red Sea, have pushed Brent crude back above $94 a barrel: almost 30 per cent higher than at the start of the month. As a result, inflation risks have risen once again.