Lagarde: The Eurozone economy has shown resilience, and a 25 basis point rate hike can withstand scrutiny under all three scenarios.

On September 10, European Central Bank President Christine Lagarde said that despite the adverse effects of the energy shock, the eurozone economy still showed resilience in the second quarter.

At a press conference in Berlin, she stated that economic growth is broadly distributed across various countries and industries, a trend likely to continue into the third quarter. While the recent economic outlook has improved, job growth continues to slow.

Lagarde stated that the economic growth outlook still faces downside risks, particularly due to the Middle East conflict and developments in the Russia-Ukraine situation.

She also stated that inflation well above target will continue into the first half of 2027, posing upside risks to the inflation outlook. The energy shock could worsen further, and its impact on other prices and wages may be stronger than currently expected.

She stated that the discussions at the meeting focused on the latest policy decisions and did not address future policy paths. She said, "In fact, we didn't discuss any future policy paths at all, nor did we discuss the possibility of this or that scenario, because we are very seriously adhering to the established policy framework."

The decision to raise interest rates was unanimously approved. Lagarde stated that the decision stood the test under all three scenarios set by the central bank. She said the ECB again set up dovish, adverse, and severe scenarios, focusing primarily on a significant source of shock: energy prices; "Our decision to raise rates by 25 basis points stands the test under all three scenarios."

When asked about her future, Lagarde said there was nothing to announce at the moment.

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