In an interview, European Central Bank President Christine Lagarde defended the ECB’s latest key interest rate increase, arguing that a prolonged energy shock requires a monetary policy response while euro area inflation remains above the 2% medium-term target at 3.3%. She linked the shock to the conflict in the Middle East and the destruction of refining capacity, particularly in Russia, and expects continued energy price volatility and pressure despite the associated risk to growth. Lagarde stressed that the ECB must set policy for the euro area as a whole rather than respond to conditions in individual countries. She also called for structural measures to lift European productivity, including progress on capital markets union, simpler regulation and continued labor market and pension reform. On financial stability, Lagarde said high artificial intelligence sector valuations could undergo a correction and highlighted circularity risk among interconnected investments and supply contracts. While European banks hold AI-related assets, she argued that the financial sector is substantially stronger than during the 2008 and 2011 crises.
2026-09-12European Central Bank
European Central Bank President Christine Lagarde defends rate increase as euro area inflation reaches 3.3%
European Central Bank President Christine Lagarde defended the latest rate increase as a response to euro area inflation of 3.3% and a prolonged energy shock. She expects continued energy price pressure despite risks to growth. Lagarde also warned that elevated artificial intelligence valuations could correct, although Europe’s financial sector is stronger than during earlier crises.