European Central Bank President Christine Lagarde said a measured policy response remained appropriate as euro-area inflation accelerated to 3.8% in September and energy prices are expected to keep headline inflation elevated into 2027.
Eurostat reported annual euro-area inflation rose from 3.2% in August to 3.8% in September. Energy accounted for 1.71 percentage points of the September rate, while services represented 1.52 points. Inflation excluding energy, food, alcohol and tobacco stood at 2.5%, below the headline rate.
In a statement published Oct. 17 for the International Monetary and Financial Committee’s 54th meeting in Bangkok, Lagarde said the scale of the energy shock called for attention. “A measured response remains appropriate to keep inflation in check,” she said. The statement announced no new interest-rate decision.
ECB officials expect higher energy prices to keep headline inflation well above the bank’s 2% goal into the first half of 2027, with inflation returning to around target near year-end. Lagarde said the bank had not seen material spillover into other prices and wages beyond the effects already included in its projections.
A June rate increase was followed by a 25-basis-point rise in each of the ECB’s three key rates in September. Effective Sept. 16, the deposit facility rate was 2.50%, the main refinancing operations rate was 2.65% and the marginal lending facility rate was 2.90%. Lagarde said future decisions would reflect incoming data, the inflation outlook, underlying price pressures and how monetary policy affects the economy.
The ECB’s September projections put annual euro-area GDP growth at 0.9% for 2026, 1.4% for 2027 and 1.5% for 2028. Lagarde said risks pointed toward higher inflation and weaker growth. She said lower energy inflation and a resilient labor market should support real incomes, while infrastructure and defense spending, along with investment in AI and digital technology, should support growth.
Eurostat is due to publish its October flash inflation estimate on Nov. 4.
