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President Lagarde presents the latest monetary policy decisions – 11 June 2026 — Transcript

by European Central Bank · 2,029 words · 410 segments · language en · Watch on YouTube

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0:01Today, the European Central Bank's
0:02Governing Council took its latest
0:04monetary policy decisions. In this
0:06episode, you'll hear President Christine
0:07Lagarde deliver the monetary policy
0:09statement from the press conference
0:11where she explains those decisions.
0:13You're listening to Euro Matters, the
0:15European Central Bank podcast. Today is
0:18Thursday, the 11th of June, 2026, and
0:21here is the monetary policy [music]
0:23statement.
0:24>> The Vice President, our new Vice
0:26President, and I welcome you to our
0:28press conference.
0:32The Governing Council is committed to
0:34setting monetary policy to ensure that
0:36inflation stabilizes at our 2% target in
0:39the medium term.
0:41In line with this commitment,
0:44we today decided to raise the three key
0:47ECB interest rates by 25 basis points.
0:53The war in the Middle East is generating
0:55inflation pressures, and the decision to
0:57raise rates is robust across a range of
1:01scenarios, mapping out how the shock
1:04might evolve
1:06and affect the medium-term outlook for
1:08the euro area.
1:11In the baseline of the new Eurosystem
1:14staff projections,
1:16headline inflation is expected to
1:17average 3% in '26, 2.3% in '27, and 2%
1:24in '28.
1:26For inflation excluding energy and food,
1:29the baseline foresees an average of 2.5%
1:32in '26 and '27,
1:35and 2.2% in '28.
1:39Compared with March,
1:40staff have revised up their baseline
1:43projection for inflation in '26 and '27
1:47owing to a higher path for energy
1:50prices,
1:51which to some extent is expected to feed
1:55into food, goods, and services
1:57inflation.
2:00The baseline sees economic growth at an
2:02average of 0.8%
2:05in 2026,
2:071.2% in 2027,
2:09and 1.5% in 2028.
2:14This is a downward revision for 2026 and
2:162027, reflecting a more pronounced
2:19impact of the war on commodity markets,
2:23real incomes, and also confidence.
2:27The outlook remains uncertain with
2:30upside risks for inflation and downside
2:33risks for economic growth.
2:36The full implication of the war for
2:38medium-term inflation and growth
2:41will depend on the intensity and
2:44duration of the energy price shock, as
2:47well as the scale of its indirect and
2:49second-round effects.
2:52This uncertainty is also reflected in
2:54the broad range of outcomes for
2:56inflation and growth in the updated
2:59illustrative scenarios put together by
3:02Eurosystem staff.
3:05These will be published with the staff
3:08projections on our website.
3:12With today's decision, we remain
3:14well-positioned to navigate the
3:16uncertainty caused by the war.
3:19We will closely monitor the situation
3:22and follow a data-dependent and
3:24meeting-by-meeting approach to
3:26determining the appropriate monetary
3:29policy stance.
3:31In particular, our interest rate
3:32decisions will be based on our
3:35assessment of inflation outlook and the
3:37risks surrounding it
3:39in light of the incoming economic and
3:41financial data,
3:42as well as the dynamics of underlying
3:45inflation and the strength of monetary
3:47policy transmission.
3:49We are not pre-committing to a
3:52particular rate path.
3:55The decision taken out to taken today
3:57are set out in a press release available
4:00on our website.
4:02So, I will now outline in more detail
4:05how we see the economy and inflation
4:07developing
4:09and will then explain our assessment of
4:11financial and monetary conditions.
4:16Let me first look at the economic
4:17activity.
4:20Adjusting for a temporary factor in
4:22Ireland,
4:24the euro area economy grew in the first
4:26quarter supported by domestic demand and
4:29exports.
4:31Yet, the war in the Middle East is
4:33weighing on activity and surveys are
4:36pointing to a slowdown especially in
4:39services.
4:41Manufacturing has held up so far. In
4:44part, this is because firms have been
4:46building up stocks to cope with supply
4:49chain pressures.
4:51It also reflects higher defense
4:53spending.
4:56The labor market remains resilient.
4:59Unemployment at 6.3% in April remains
5:03close to historical lows.
5:06The first quarter saw additional jobs
5:09being created, although at a slower pace
5:12than in the last quarter in 2025.
5:16Labor demand has cooled further
5:19and firms and households expect the
5:21labor market to weaken.
5:24Looking ahead, staff now expects
5:27domestic demand to be weaker than they
5:29projected in March as the war weighs on
5:32confidence and higher energy costs erode
5:35real incomes.
5:37At the same time,
5:39household balance sheets are solid
5:41overall
5:42and consumption should remain the main
5:45driver of growth.
5:47Higher energy costs and lower confidence
5:51will dent private investment in the
5:53short run,
5:54but it should be underpinned by firms
5:57investing in new digital technologies.
6:01Government spending more on defense and
6:04infrastructure should continue to
6:06support public investments.
6:09These factors are expected to provide
6:11some cushioning
6:13against the fallout from the war.
6:17The Governing Council highlights the
6:19urgent need to strengthen the euro area
6:22economy while maintaining sound public
6:25finances.
6:27Fiscal sustainability is a crucial
6:29anchor for broader economic stability.
6:33Fiscal responses to the energy price
6:36shock should be temporary, targeted, and
6:38tailored,
6:40as emphasized in the European Commission
6:422026 European Semester Spring Package.
6:47Reforms to enhance the euro area's
6:50growth potential and accelerate the
6:52energy transition to reduce reliance on
6:54fossil fuels
6:56are more vital than ever.
7:00Completing the savings and investment
7:02union is key to funding innovation,
7:06supporting the green and digital
7:07transition,
7:09and improving productivity.
7:12The digital euro and tokenized wholesale
7:14central bank money will enhance Europe's
7:17strategic autonomy, competitiveness, and
7:20financial integration, and will boost
7:22innovation in payments. It is thus
7:24essential to swiftly adopt the
7:27regulation on the establishment of the
7:29digital euro.
7:31Simplifying and harmonizing rules across
7:35the EU single market will help European
7:38firms grow faster.
7:42Let me now look at inflation.
7:46Inflation rose to 3.2% in May
7:49from 3% in April.
7:53Energy price inflation ticked up to
7:5610.9%
7:58in April
7:59while food price inflation fell from
8:022.4% to 2%.
8:06Inflation excluding energy and food
8:08picked up to 2.5%
8:11from 2.2% in April as goods inflation
8:15edged up to 0.9%
8:19and services inflation increased from 3%
8:23to 3.5%.
8:27Domestic cost pressures eased in the
8:30first quarter supported by slower growth
8:33in wages and profits.
8:35The ECB's wage tracker and surveys on
8:38wage expectations continue to indicate
8:41that wage growth should ease over the
8:43year.
8:45However, it is becoming more expensive
8:47for firms to source other inputs
8:50and they therefore expect to put up
8:52their selling prices.
8:55Moreover, some indicators of underlying
8:57inflation
8:59have already been driven higher by the
9:02energy shock.
9:05Inflation expectations over shorter
9:07horizons remain well above levels before
9:11the outbreak of the war in the Middle
9:12East.
9:14At the same time
9:15most measures of longer-term inflation
9:18expectations stand at around 2%
9:22supporting the stabilization of
9:23inflation around target in the medium
9:26term.
9:28The increase in energy prices
9:32will lift inflation further over the
9:35summer
9:36and keep it well above target into the
9:39first half of 2027.
9:44It will also have an impact on food,
9:48goods, and services inflation.
9:52Inflation should then return to target
9:55in the second half of 27,
9:57supported by falling energy prices and
10:01slower increases in other prices.
10:05However,
10:06the war in the Middle East remains a
10:08major source of uncertainty.
10:11And the longer energy prices stay high,
10:15the more likely they are to drive up
10:17broader inflation
10:19through indirect and second-round
10:22effects.
10:23We will We will therefore closely
10:26monitor the size and persistence of the
10:29energy price increase
10:31and how it feeds through to price and
10:33wage setting,
10:35inflation expectations,
10:38and overall economic dynamics.
10:42Turning now to the risk assessment.
10:46The risks to the growth outlook
10:49are to the downside,
10:51mainly owing to the war in the Middle
10:53East, which has added to the volatile
10:55global policy environment.
10:58Prolonged disruption of energy supplies
11:02could increase energy prices further and
11:04for longer than currently expected.
11:08These factors would erode real incomes
11:11even more
11:12and make firms and households more
11:14reluctant to invest and spend.
11:18The drag on growth would intensify if
11:20the closure of major shipping routes
11:23were to cause acute shortages of key
11:26inputs that forced Euro area firms to
11:29curtail output.
11:32A worsening of global financial market
11:34sentiment or a tighter supply of credit
11:37could dampen demand.
11:40Additional frictions in international
11:42trade could also further disrupt supply
11:44chain, reduce exports, and weaken
11:46consumption and investment.
11:50Other geopolitical tensions, in
11:52particular Russia's unjustified war
11:55against Ukraine,
11:56remain a major source of uncertainty.
12:00By contrast, growth could turn out to be
12:03higher
12:04if the economy and energy markets were
12:07to adapt more quickly than expected to
12:10the disruption caused by the war in the
12:12Middle East or if the war was resolved
12:15promptly and sustainably.
12:19Moreover, planned defense and
12:21infrastructure spending reforms to
12:23enhance productivity and the euro area
12:26firms adopting new technologies
12:28may drive up growth by more than
12:30expected.
12:33A deeper integration of the single
12:34market would also boost growth beyond
12:37current expectations.
12:42The risks now to the inflation outlook
12:45are to the upside.
12:47If energy prices were to rise by more
12:50and for longer than currently expected,
12:53euro area inflation would increase
12:55further.
12:57This could be reinforced and become more
12:59persistent if higher energy prices were
13:02to spill over by more than expected to
13:04other prices and to wages,
13:07if longer-term inflation expectations
13:09were to rise in response, or
13:11if global supply chains were disrupted
13:14more broadly.
13:17Ongoing trade tensions could also give
13:20rise to more fragmented global supply
13:22chains,
13:23curtail the supply of critical raw
13:25materials,
13:26and worsen capacity constraints in the
13:29euro area economy.
13:32Extreme weather events
13:34and the unfolding climate and nature
13:36crisis more broadly
13:38could drive up food prices by more than
13:41expected.
13:43By contrast
13:45inflation could turn out to be somewhat
13:47lower
13:48if the economic effects of the war in
13:50the Middle East prove to be
13:53more short-lived than currently expected
13:56or if indirect or second-round effects
13:59prove less pronounced than anticipated.
14:03More volatile and risk-averse financial
14:05markets could weigh on demand and
14:08thereby lower inflation as well.
14:13So looking now at the financial and
14:15monetary conditions.
14:18Financial conditions are broadly
14:20unchanged since our last meeting
14:23but remain tighter than before the war.
14:27The cost of issuing market-based debt
14:29rose to 4% in April from 3.9% in March.
14:35Bank lending rates for firms remained at
14:383.6% in April
14:40and mortgage rates at 3.4%.
14:45The annual growth rate of bank lending
14:48to firms increased to 3.4% in April
14:52from 3.2% in March
14:55while the growth rate of corporate bond
14:57issuance rose to 4.6%.
15:02Mortgage lending in April again grew by
15:053%.
15:08In line with our monetary policy
15:09strategy
15:11the governing council thoroughly
15:12assessed the links between monetary
15:14policy and financial stability.
15:18Euro area banks are resilient
15:21supported by strong capital and
15:23liquidity ratios, solid asset quality,
15:27and robust profitability.
15:30However, a sudden, sharp drop in asset
15:32prices,
15:34potentially amplified by the non-bank
15:36financial sector and deteriorating asset
15:38quality, particularly in energy and
15:41trade sensitive sectors, would pose
15:44risks to financial stability.
15:47These risks increase the longer the
15:50current geopolitical conflict lasts.
15:54Macroprudential policy remains the first
15:57line of defense against the buildup of
15:59financial vulnerabilities, enhancing
16:02resilience, and preserving
16:04macroprudential space.
16:07So, in conclusion, the Governing Council
16:10today decided to raise the three key ECB
16:13interest rates by 25 basis points.
16:17We are committed to setting monetary
16:19policy to ensure that inflation
16:21stabilizes
16:23at our 2% target in the medium term.
16:26We will follow a data-dependent and
16:28meeting-by-meeting approach to
16:30determining the appropriate monetary
16:32policy stance.
16:34Our interest rate decisions will be
16:36based on our assessment of the inflation
16:38outlook
16:39and the risks surrounding it in light of
16:42the incoming economic and financial
16:44data,
16:45as well as the dynamics of underlying
16:48inflation,
16:49and the strength of monetary policy
16:51transmission.
16:52We are not pre-committing to a
16:54particular rate path.
16:57In any case, we stand ready to adjust
16:59all of our instruments within our
17:01mandate to ensure that inflation
17:03stabilizes sustainably at our
17:06medium-term target, and to preserve the
17:08smooth functioning of monetary policy
17:11transmission.
17:12>> That was President Christine Lagarde
17:14presenting the ECB's monetary policy
17:16decisions. To hear more from Euro
17:18Matters, make sure [music] to subscribe.
17:20Every first and third Tuesday of the
17:22month, we unpack the stories, ideas, and
17:25decisions shaping Europe's economy and
17:28bring you fresh perspective from the
17:29people at the heart of it all.
17:31The next podcast on the monetary policy
17:33statement will be published on the 23rd
17:35of July, 2026.
17:38In the spirit of Europe, [music] I'd
17:39like to end in Spanish and say,
17:41hasta la próxima. Until next time,
17:44thanks for listening.

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