TL;DR
Get smart everyday buys delivered free — and shop member deals
- Fast, free delivery on millions of items
- Access to Prime Big Deal Days deals on October 6–7
- Prime Video, Amazon Music and more included
ECB President Christine Lagarde told the European Parliament’s economic and monetary affairs committee that the bank raised its three key rates by 25 basis points earlier in September. She said energy prices were lifting the inflation outlook, while the ECB had not yet seen evidence of the shock feeding into wages. Lagarde also discussed AI’s potential effects on productivity, investment, jobs and inflation.
European Central Bank President Christine Lagarde told European Parliament lawmakers on September 28 that the ECB had raised its three key interest rates by 25 basis points earlier this month, citing higher energy prices and the need to keep inflation on course for its 2% medium-term target. At the hearing, she also discussed how artificial intelligence could affect Europe’s economy and the outlook for monetary policy.
Lagarde said the euro area economy had remained resilient despite an energy shock. Real GDP grew solidly in the second quarter of 2026, with growth across most countries and sectors, and the pattern was expected to continue in the third quarter. Manufacturing, supported by higher public spending on defence and infrastructure, and a recovery in services contributed to that picture. The ECB’s September staff projections put growth at 0.9% in 2026, 1.4% in 2027 and 1.5% in 2028.
Inflation rose in August. The annual headline rate reached 3.2%, up from 2.9% in July, while energy inflation climbed to 14.3% from 10.3%. Lagarde attributed the energy increase in particular to higher refining margins for liquid fuels and higher energy commodity prices. Inflation excluding energy and food edged down to 2.4%, as services inflation fell more than goods inflation rose. Compensation per employee grew 3.3% in the second quarter, down from 3.6% in the first.
Lagarde said the ECB assesses the inflation outlook, underlying inflation and how monetary policy affects borrowing costs and economic growth. The bank saw higher inflation ahead, largely because of energy, but no evidence yet that higher energy costs were driving up wages. Long-term inflation expectations remained around 2%, she said, while the overall outlook carried upside risks to inflation and downside risks to growth.
Rate Rise Meets Energy Shock
The hearing linked the ECB’s rate decision to a central concern for households, companies and governments: whether an energy price shock will stay temporary or spread into wages and other prices. Lagarde said the ECB does not react to energy prices alone; it responds when the shock risks becoming embedded in inflation. That distinction helps explain why policymakers raised rates even as wage growth eased and the economy continued to expand.
The figures point to competing pressures. Headline inflation accelerated in August, led by energy, while inflation excluding energy and food edged down and wage growth slowed. Lagarde said long-term expectations remained near the ECB’s target, but short-term expectations were elevated. The bank’s next decisions will depend on how those indicators develop, alongside the effects of higher borrowing costs on demand and growth.
AI adds another uncertainty to that assessment. Lagarde said firms were expected to devote around 10% of total investment to AI in 2026, and AI-related borrowing already accounted for roughly a quarter of credit growth to firms. She said the technology could improve productivity, competitiveness and living standards, while also affecting investment, labour markets and inflation. The speech excerpt available for this report does not set out her full analysis of those channels.
Top picks for "hear committee economic"
As an affiliate, we earn on qualifying purchases.
The Data Behind September’s Decision
Lagarde delivered the remarks in Brussels on September 28 at a regular hearing of the European Parliament’s Committee on Economic and Monetary Affairs. The speech described economic conditions and ECB policy following the bank’s monetary policy meeting earlier in September, when it raised its three key interest rates by 25 basis points.
The September ECB staff projections, as cited by Lagarde, forecast average headline inflation of 3.0% in 2026, 2.5% in 2027 and 2.1% in 2028. For inflation excluding energy and food, the projections were 2.5%, 2.6% and 2.3% for those years, respectively. These are projections, not reported outcomes. Lagarde also said unemployment stood at 6.4% in July, while employment and labour-force growth were slowing.
Her remarks placed AI within this economic outlook rather than treating it as a separate technology issue. The speech described activity related to AI in digital services, business investment and exports, while noting that the technology’s overall macroeconomic effect remained uncertain.
“We do not react to energy prices, we react if we see risks of higher energy prices becoming embedded in inflation.”
— Christine Lagarde, ECB president
Wage Effects and AI’s Reach
Lagarde said the ECB had not yet seen evidence that higher energy prices were feeding into higher wages. Whether that changes, and how energy costs pass through to other prices, remains uncertain. The bank also faces an outlook with risks on both sides: inflation could be higher than expected, while growth could be weaker.
The speech identifies possible effects of AI on productivity, investment, labour markets and inflation but the source material supplied for this report ends partway through Lagarde’s discussion of those effects. It does not provide her full account of the channels, supporting evidence or policy implications. The eventual scale and timing of AI’s effects on the euro area economy are also uncertain.
ECB Tracks Prices and Wages
The ECB’s next steps will depend on incoming data and its assessment of the inflation outlook, underlying price pressures and monetary policy transmission. Lagarde’s remarks indicate that policymakers will watch for signs that energy costs are spreading into wages and other prices, while also weighing the effect of higher interest rates on growth.
The September projections provide the bank’s current baseline for growth and inflation through 2028, but they are not a commitment to a fixed course. The available speech does not specify a further rate decision or a date for one. Its discussion of AI is also incomplete in the supplied source excerpt, leaving further details of Lagarde’s assessment unreported here.
Key Questions
What did Lagarde tell the European Parliament committee?
She explained the ECB’s recent interest rate increase, discussed the euro area outlook and outlined potential economic effects of artificial intelligence.
Why did the ECB raise interest rates?
Lagarde said the bank raised its three key rates by 25 basis points earlier in September as it sought to keep inflation on course to stabilise at its 2% medium-term target amid higher energy prices.
Had energy prices already pushed up wages?
Lagarde said the ECB saw no evidence at that point that higher energy prices were feeding into higher wages. Compensation per employee grew 3.3% in the second quarter, down from 3.6% in the first.
What did Lagarde say about AI investment?
She said firms were set to devote around 10% of total investment to AI in 2026, and AI-related borrowing accounted for roughly a quarter of credit growth to firms. She also said AI’s overall macroeconomic effect was uncertain.
Source: primary
Fall Picks
fall essentials
As an affiliate, we earn on qualifying purchases.
