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Christine Lagarde leads the European Central Bank's decision to raise key interest rates by 25 basis points

The European Central Bank Governing Council voted to increase its three key interest rates by 25 basis points, bringing the deposit facility rate to 2.5% from 2.25%. The administration announced the move as a commitment to ensuring inflation stabilizes at the 2% target in the medium term.

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Christine Lagarde noted that the conflict in the Middle East and developments in Russia's war on Ukraine will keep headline inflation well above the 2% target for an extended period. While the euro zone economy has shown greater than expected resilience, the bank acknowledged that energy price shocks and global trade tensions remain risks to growth. The bank's updated projections forecast inflation excluding energy and food to reach 2.5% in 2026, 2.6% in 2027, and 2.3% in 2028. The Governing Council stated it will follow a data-dependent, meeting-by-meeting approach to monetary policy, rather than pre-committing to a particular rate path. The decision comes as government borrowing costs have risen and inflation in the euro zone hit 3.3% in August.

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