CORRECTED: MNI ECB WATCH: Lagarde Declares Disinflation Over

(Corrects 2026 growth revision in final paragraph)

The European Central Bank as expected held interest rate for a second consecutive meeting at 2% on Thursday, with President Christine Lagarde saying that the disinflationary process is now over and that risks to economic growth are more balanced.

“The disinflationary process is over. And I'm referring here to the causes for inflation that we have experienced in the last few quarters,” Lagarde told the post-meeting news conference, adding that the ECB continued to be in a good place with inflation where it wants it to be.

But the ECB stuck to its data-dependent and meeting-by-meeting approach, and the president insisted there was no bias or direction of travel.

Asked about projected inflation undershoots for both 2026 and 2027, Lagarde reiterated that the ECB tolerates small deviations from the 2% target in both directions.

The eurozone economy is exhibiting greater-than-expected resilience, due not only to frontloading of international trade but also higher investment and consumption, she said.

Tariffs, the stronger euro and increased global competition are expected to hold growth back for the rest of the year, but economic headwinds should fade in 2026, she said. (See MNI SOURCES: Data-Led ECB To Hold A Cut In Reserve If Needed)

“While recent trade agreements have reduced uncertainty somewhat, the overall impact of the change in the global policy environment will only become clear over time.”

FRANCE

Lagarde avoided any clear reference to France’s rising borrowing costs, but stressed that the use of the ECB’s Transmission Protection Instrument was not discussed in the meeting. “The discretion of the Governing Council always exists. But it's just an explanation because TPI wasn’t discussed at all,” she said.  (See MNI INTERVIEW: ECB Should Not Ease French Bond Woes - Papadia)

The ECB slightly raised its projections for headline inflation for 2025 and 2026, to 2.1% and 1.7% respectively, while lowering that for 2027 to 1.9%. Core inflation projections were unchanged with the exception of 2027, which was one tenth lower at 1.8%

The growth projection for 2025 was revised up three tenths to 1.2%, but the estimate was revised down to 1.0% for 2026, from 1.1% in June, while 2027’s figure was unchanged at 1.3%.