London Daily

Focus on the big picture.
Monday, Sep 07, 2026

ECB’s Lagarde tells governments to back off and keeps tightening

ECB’s Lagarde tells governments to back off and keeps tightening

The central bank chief warned governments against spending too heavily to shield their people from high energy prices.

European Central Bank chief Christine Lagarde rebuffed EU leaders’ criticism of her monetary policy approach on Thursday, delivering another big interest rate hike in a bid to fight red-hot inflation in the eurozone.

“We have to do what we have to do,” Lagarde said during her press conference after the ECB raised rates by a whopping 75 basis points to 1.5 percent, bringing it to the highest level since 2009. “A central bank has to focus on its mandate. Our mandate is price stability.”

In its fastest tightening cycle on record, the ECB has now raised rates by a total of 2 percent over its last three meetings — and more is to come, according to a statement following the policy meeting in Frankfurt.

The bank’s Governing Council “expects to raise interest rates further, to ensure the timely return of inflation to its 2 percent medium-term inflation target,” it said.

The comments from Lagarde, a former French finance minister, followed a series of critical remarks from EU leaders.

In the week up to the meeting, French President Emmanuel Macron, Italian Prime Minister Giorgia Meloni and Portuguese Finance Minister Fernando Medina all expressed worries over the speed at which the ECB is raising interest rates and the implications this may have on growth. Earlier in the month, similar criticism came from Finnish Prime Minister Sanna Marin.

“I’m concerned to see lots of experts and certain European monetary policymakers explaining to us that we need to break demand in Europe to better contain inflation,” Macron told Les Echos in an interview earlier this week. “One must be very careful.”

Lagarde, who has previously said the ECB may have to raise rates to a level where they hurt growth, said the bank was willing to raise rates beyond neutral levels, where interest rates neither boost growth in order to ensure price stability.

But she did not say at which pace and to which level interest rates will move.

Her broader comments, however, will cement market expectations of a slowdown in tightening ahead.

Not only did she drop the reference to rate hikes over the “next several meetings” from her statement, but she also noted that “the Governing Council has made substantial progress in withdrawing monetary policy accommodation.”


Warning to governments


In addition, she said that policymakers will consider the rising risk of a recession and its dampening impact on inflation as well as the fact that previous tightening moves will only work with a lag, meaning that the full impact of previous hikes has yet to play out.

This does not mean that tensions won’t flare up again between the ECB and eurozone capitals.

“ECB President Lagarde put more emphasis on recession risks at today’s press conference,” said Commerzbank economist Jörg Krämer. “But due to persistently high inflation data as well as de-anchored inflation expectations, another big rate hike in December remains on the table.”

Despite the recent measures to placate inflation in the Eurozone, tensions might flare up again between the ECB and EU capitals


Lagarde doubled down on her demands that governments ensure fiscal measures remain limited as otherwise even more aggressive ECB action will be in store. Germany and other governments are providing generous subsidies to shield their populations from major increases in energy prices.

“I must have repeated many, many times the famous triple-T, which is temporary, targeted and tailored,” she said. “Which, from our perspective, will help them address the needs of the most affected by income erosion and also by inflation, but without fueling inflation on a broad basis, because that would be utterly counterproductive in that it would require that we take harder monetary policy measures in order to deliver on our mandate.”

At the same time, governments should pursue fiscal policies that show they are committed to gradually bringing down high public debt ratios, Lagarde said. Recent market turmoil in the United Kingdom has shown what happens when fiscal policy goes on a collision course with a central bank fighting red-hot inflation.

ECB relations with fiscal authorities will no doubt remain a key focus in the coming months, not least because Lagarde signaled the Governing Council will agree on principles of reducing its massive government bond holdings at the December meeting that indebted member countries have relied on heavily.

Newsletter

Related Articles

0:00
0:00
Close
University of Bristol Opens £500 Million Innovation Campus
Families Give Evidence to Independent Review of Sussex Maternity Failures
Sweden Confirms Deportation of 458 British Citizens Over Post-Brexit Residency Rules
UK Launches £3 Million Challenge for Long-Duration Energy Storage
Reform UK Proposes £100 Billion in Spending Cuts and Brownfield Deregulation
Andy Burnham Warns Macron That EU Procurement Rules Could Hurt British Steel
Andy Burnham Faces Major Decision on Future North Sea Oil and Gas Drilling
SEND Support in England Projected to Reach One in 10 Pupils
England’s Housing Courts Struggle With Surge in No-Fault Eviction Cases
Violent Clashes Erupt in Portsmouth During Protest Against Asylum Processing
Three-Quarters of NHS Emergency Staff Report Regular Violence or Aggression
UK Considers Converting Female Prison Space for Male Inmates as Overcrowding Worsens
UK House Prices Record First Annual Decline in Nearly Three Years
UK Government Reassesses Policy Toward Israel Amid Calls for Diplomatic Shift
Reform UK Faces Police Scrutiny Over Alleged Foreign Donations Scheme
University of Bristol Opens £500 Million Temple Quarter Enterprise Campus
Online Bookmakers Accused of Privacy Breaches Through Cookie Consent Practices
Health Campaigners Urge UK Government to Abandon U.S. Pharmaceutical Agreement
Three-Quarters of UK A&E Staff Report Regular Violence or Aggression
Far-Right Demonstrations Target Portsmouth as Small-Boat Crossings Fuel Tensions
UK Records Hottest Summer on Record After Severe Heatwaves
UK Travellers Face Renewed EU Border Delays as Temporary Flexibility Ends
UK Rejects Calls to Pause AI Data Centre Expansion Despite Energy Concerns
UK Defence Figures Push for 3% Spending Target Amid Falklands Concerns
England Faces Rising Financial Pressure as Special Educational Needs Plans Surge
Metropolitan Police Consider Reform UK Probe Over Overseas Donations
Keir Starmer to Leave Parliament, Triggering By-Election
UK Treasury Weighs Windfall Taxes on Banks and Oil Companies Amid Bond Market Turmoil
Jaguar Land Rover to Cut Thousands of Jobs as UK Government Rules Out Bailout
OpenAI Unveils GPT-6 and Says: "We May Already Have Reached AGI"
Congressman Accused Andrew of Sex Crimes in the United States
Donald Trump: "I'm Glad Harry and Meghan Left the United States"
Spicy Food Is Linked to Lower Death Risk — but It Is Not a Miracle Cure
AfD Enters Saxony-Anhalt Election at 41% in Historic Test for German Politics
Gen Z Turns to Investing as America's First-Home Dream Moves Further Out of Reach
Thousands Join London March Calling for Tighter Abortion Restrictions
Institute of Directors Says Tax and Regulatory Uncertainty Still Weighs on UK Investment
Bank of England Faces Rate Dilemma as Weak Growth and Persistent Inflation Raise Stagflation Risks
Masked Anti-Immigration Protesters Block Roads to Port of Dover
Prime Minister Andy Burnham Sets Out Devolution and Re-Industrialisation Agenda
British Chambers of Commerce Forecasts UK Growth of Just 1% Through 2027
UK Government Advances Bill to Tighten Rules on Overseas Political Donations
Nigel Farage Faces Scrutiny Over Alleged Reform UK Donation-Law Evasion
Thousands Join Anti-Abortion March Through Central London
UK Beekeepers Call for Nationwide Tracking as Asian Hornet Sightings Increase
England Sees Sharp Rise in Property Subsidence Claims After Record Summer Heat
House of Lords Advances Financial Services Reform Bill
House of Lords Begins Detailed Scrutiny of Railways Bill and Great British Railways Plan
UK Treasury Cuts Green Book Discount Rate to Support More Regional Infrastructure Projects
Reform UK Suspends Two Senior Aides After Undercover Report on Foreign Donation Rules
×