ECB Restores Interest Rates as Main Tool, With Inflation Seen at 2% Only in Late 2027
Updated
Updated · Euronews · Jun 30
ECB Restores Interest Rates as Main Tool, With Inflation Seen at 2% Only in Late 2027
3 articles · Updated · Euronews · Jun 30
Summary
Sintra marked a policy reset as Christine Lagarde said the ECB can again rely mainly on interest rates, ending an era dominated by bond buying, emergency lending and heavy forward guidance.
Late 2027 is when ECB projections see inflation returning to the 2% target, and Lagarde said June's rate hike addressed a real inflation problem rather than serving as an "insurance" move.
Three tests now guide decisions—the inflation outlook, underlying price dynamics and policy transmission—while Lagarde said explicit forward guidance is "not in the cards."
Oil's swing from nearly $120 a barrel in March to about $72 after last week's interim Middle East peace deal underscored her point that supply shocks now hit faster and reverse faster.
Europe's stronger banking framework, common fiscal tools and energy transition have, in the ECB's view, made the euro area resilient enough for a simpler toolkit even as the global backdrop grows less predictable.