ECB President Christine Lagarde said on 12 September 2026 that the central bank's Thursday increase in key interest rates is intended to contain inflation, which she said is running at 3.3% in the euro area against a 2% medium-term target. In an interview with Ouest-France conducted by Jean-Christophe Lalay and Maxime Mainguet, Lagarde described the rate decision as a response to a longer-than-expected shock caused by the conflict in the Middle East and the destruction of refining capacity around the world, especially in Russia, which has raised energy costs and pushed up broader prices. She said the euro area economy remains resilient, making it necessary to act despite the uncertainty.
Lagarde addressed concerns that higher rates could weigh on growth, saying that argument applies when shocks are short-lived, but the current energy shock is expected to persist, with volatility and pressure on energy prices continuing. She acknowledged that higher prices also pose a risk to growth. Asked about France, where growth is subdued and inflation is lower than in neighbouring countries, she said the ECB must act for the entire euro area rather than France, Lithuania or Germany in isolation. She said France is among the countries planning structural reforms and urged it to implement them, including the capital markets union, simplification of administrative regulations, greater labour-market flexibility, a path that has worked well in Germany and Spain, and pension reform in whatever form it takes, noting that life expectancy continues to rise.
Turning to longer-term growth, Lagarde said demographic pressure can be offset by productivity gains, adding that Europe has talent, a well-educated population and ample savings that are not fully mobilised. She said the dramatic shift in US policy in recent years should prompt quicker, resolute action. On government borrowing costs, which she said are rising almost everywhere, she attributed them to public finances, particularly in the United States, and to funding needs for artificial intelligence, which compete with sovereign debt. She said that when investors can choose among issuers, costs inevitably rise. She said the financial sector is much stronger than in 2008 or 2011.
Lagarde rejected proposals to cancel French debt held by the Banque de France, calling the idea absurd, financially dangerous and inconsistent with European treaties. She said ECB staff had recently warned of a hypothetical AI-related stock market correction in the United States, adding that valuations in the AI sector are very high, with planned initial public offerings as evidence. She said circularity risk, in which one company takes a stake in another and then awards it a contract to supply microchips, is being assessed. An AI-related correction is possible, she said, but its timing is unknown, and European banks hold AI-related assets. On her future, Lagarde said she is not a candidate, will leave the ECB in 2027, when her term is due to end in October, and does not plan to return to national politics. She said she will be turning 71 soon.
