On Thursday 11 September, the ECB Governing Council unanimously decided for the second time in a row to leave its main key rates unchanged, taking the view that the monetary institute continues to be well placed to carry out its task of controlling inflation over the medium term.
The “disinflationary process”, which began after the shock of rising prices caused by Russia's invasion of Ukraine, “is over”, said ECB President Christine Lagarde. “Inflation is where we wanted it to be”, she added, citing economic resilience and a strong internal market as factors anchoring the path of inflation. We will make sure that we “stay in a good place”, but “there is no predetermined path”, she stressed, recalling several times that the governors take monetary decisions on the basis of updated data, meeting after meeting.
The deposit facility rate, the main refinancing operations and the marginal lending facility are therefore maintained at 2.00, 2.15 and 2.40% respectively.
On Thursday, the ECB unveiled new inflation projections for the euro area. Price rises are expected to reach 2.1% in 2025, 1.7% in 2026 and 1.9% in 2027, representing a fall of 0.1% for 2025 and 2026 compared with the June forecasts (see EUROPE 13654/19). Excluding food and energy prices, the path of underlying inflation is as follows: 2.4% in 2025, 1.9% in 2026 and 1.8% in 2027.
As far as the euro area economy is concerned, the ECB is now of the opinion that the risks are “broadly balanced”, said Ms Lagarde, whereas downside risks predominated in June due to the high level of uncertainty linked to transatlantic trade tensions.
Since then, the European Commission and the United States have reached agreement on an asymmetrical tariff deal, and the risk of retaliatory measures by the EU in response to US customs barriers, included in the June projections, has disappeared. The transatlantic agreement is likely to reduce uncertainty, even if its real effects will be more visible over time, according to the former head of the IMF. And increased investment in infrastructure and the defence sector, as well as consumer spending, will also support activity.
According to the ECB, the trajectory of GDP growth in the euro area will be as follows: 1.2% in 2025 (up 0.3% on the June projections), 1.0% in 2026 and 1.3% in 2027.
Ms Lagarde indicated that the strength of growth in the first half of this year, quantified at 0.7%, was due to the anticipation of US tariffs by economic players, but not exclusively. Nevertheless, there will be “headwinds”, she warned. This is why the ECB has kept its growth forecasts for 2027 unchanged.
France. The former French minister was asked about the political crisis in her country.
Not wanting to comment on the situation of individual countries, Ms Lagarde said she was “confident” that French politicians would be able to “reduce uncertainty as much as possible” and “adhere” to the European economic governance framework. As for the EU sovereign bond markets, they are functioning “in an orderly fashion with good liquidity”, she added. She went on to say that the ECB had all the instruments it needed to ensure that its monetary policy was properly transmitted, including via the capital markets.
To see the ECB decisions: https://aeur.eu/f/idy (Original version in French by Mathieu Bion)