ECB Raises Rates to 2.5%, Lagarde Cites Ongoing Inflation Pressure

European Central Bank President Christine Lagarde supported the ECB's decision to raise interest rates to 2.5% in response to renewed inflation pressure from the Middle East conflict.

The unanimous decision was seen as a straightforward choice, and Lagarde maintained that the central bank would not commit to a specific rate path.

The ECB now expects inflation to average 3% in 2026 and 2.5% in 2027, with markets pricing three additional rate increases by October 2027.

Lagarde noted that higher energy costs will likely filter gradually into food prices and underlying inflation, keeping headline inflation above the ECB's 2% target into the first half of 2027.