FRANKFURT, Sept 10 (Reuters) – The European Central Bank raised its policy rate on Thursday for the second time this year, by a quarter point to 2.50%, seeking to quell an energy-driven rise in inflation triggered by the Iran war.
Following are highlights of ECB President Christine Lagarde’s comments at a press conference after the policy meeting.
ON HIGH BOND YIELDS
“It’s not a euro-specific issue. It’s happening across the world, and it’s a factor of multiple causes.
“It’s incorporated in our projections, taken into account, and obviously we are monitoring attentively what is happening in the markets, and particularly the long end of the curve.”
SURPRISINGLY RESILIENT ECONOMY
“We have been surprised by the resilience of our economy, and we had anticipated in previous projections that growth will be lower than what we are seeing and what we are projecting.”
TODAY’S DECISION A ‘NO-BRAINER’
“The decision that we took today, which was, by the way a unanimous decision, was a no-brainer.
“What we will have to do in the future will be determined at each and every meeting. But what I can tell you, and this is in the monetary policy statement, is that we are determined to deliver on our target.”
‘WE PROVIDE PRICE STABILITY’
“Markets do what they have to do — and we do what we have to do, which is to provide price stability, which has been defined, as you know, as the 2% target in the medium term. When I talk about framework guidance, this is what I’m talking about. And I’m assuming that markets find it helpful in order to determine the path that they understand.
“But they do their job, we do our job. And I can assure you that the entire discussions that we had today were focused on today’s decision. So we are not, and we have not actually debated at all, any kind of future path.”
“We are not taking a view as to which direction we go at our next meeting.”
LAGARDE ON HER FUTURE
“When there is something to report about me personally, you’ll be the first one to know. After my grandchildren.
And there is nothing to report.”
GAS PRICE RISKS
“Gas prices, in particular, could increase in the event of further supply disruptions or an unusually cold winter coinciding with low storage levels.”
RISKS FROM TRADE TENSIONS
“Renewed trade tensions could give rise to more fragmented global supply chains, curtail the supply of critical raw materials, and worsen capacity constraints in the euro area economy.”
CLIMATE CHANGE MAY DRIVE UP FOOD PRICES
“Extreme weather events, potentially reinforced by intensifying El Nino conditions and the unfolding climate and nature crisis more broadly, could drive up food prices by more than expected.”
UPSIDE INFLATION RISKS
“The risks to the inflation outlook are to the upside. This is due in particular to the Middle East conflict and developments in Russia’s unjustified war against Ukraine.
“The energy shock could intensify further, and its effect on other prices and wages could be stronger than currently expected.”
BOND MARKETS, TRADE TENSIONS
“A worsening of global financial market sentiment or spillovers in global bond markets could tighten credit conditions and thereby dampen demand.
“A resurgence of trade tensions between major economies could also further disrupt supply chains, reduce exports, and weaken consumption and investment.”
DOWNSIDE GROWTH RISKS
“The risks to the growth outlook are to the downside.
This is due in particular to the Middle East conflict and developments in Russia’s unjustified war against Ukraine.
“Renewed disruption of energy supplies could cause energy prices to rise further and for longer than currently expected. This would weigh on real incomes, spending, and investment.”
HEADLINE INFLATION
“Overall, headline inflation is expected to return to a round target towards the end of 2027, supported by the effects of higher interest rates.”
ON EXPECTED INFLATION
“Inflation expectations over shorter horizons remain at elevated levels. But most measures of longer-term inflation expectations stand at around 2%, supporting the stabilisation of inflation around target in the medium term.”
MODEST UPTICK IN WAGES AHEAD
“The ECB’s wage tracker points to a modest uptick to 2.7% in negotiated wage growth in the first half of 2027.”
UNDERLYING INFLATION
“Most measures of underlying inflation were broadly stable in July. Wages do not show a material response to the energy shock at this stage.”
REFINING MARGINS, COMMODITY PRICES
“(The energy inflation) increase is likely to reflect, in particular, a strong contribution from refining margins on liquid fuels, as well as higher energy commodity prices.”
NEAR-TERM GROWTH OUTLOOK
“Looking ahead, the near-term growth outlook has improved compared with the last round of staff projections, reflecting in particular the resilience of private consumption and public spending.”
RESILIENT ECONOMY
“The economy proved resilient in the second quarter, despite headwinds from the energy shock. Growth was broad-based across countries and sectors. This pattern is likely to have continued into the third quarter.”
INFLATION PRESSURES
“The conflict in the Middle East continues to generate inflation pressures, and inflation is set to remain well above target for an extended period.”
ON THE ECONOMIC OUTLOOK
“The outlook remains highly uncertain, with risks to the upside for inflation and to the downside for economic growth.”
(Reporting by Reuters Global News Desk)
