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

**Christine Lagarde** (0:01)
Today, the European Central Bank's Governing Council took its latest monetary policy decisions. In this episode, you'll hear President Christine Lagarde deliver the monetary policy statement from the press conference where she explains those decisions. You're listening to Euro Matters, the European Central Bank Podcast. Today is Thursday, the 11th of June, 2026
And here is the monetary policy statement.

**Christine Lagarde** (0:24)
The vice president, our new vice president, and I welcome you to our press conference. The Governing Council is committed to setting monetary policy to ensure that inflation stabilizes at our 2% target in the medium term. In line with this commitment, we today decided to raise the three key ECB interest rates by 25 basis points.
The war in the Middle East is generating inflation pressures and the decision to raise rates is robust across a range of scenarios, mapping out how the shock might evolve and affect the medium term outlook for the Euro area. In the baseline of the new Euro system staff projections, headline inflation is expected to average 3% in 26%, 2.3% in 27% and 2% in 28%. For inflation, excluding energy and food, the baseline foresees an average of 2.5% in 26 and 27 and 2.2% in 28 Compared with March, staff have revised up their baseline projection for inflation in 26 and 27, owing to a higher path for energy prices, which to some extent is expected to feed into food, goods and services inflation. The baseline sees economic growth at an average of 0.8% in 26, 1.2% in 27 and 1.5% in 28 This is a downward revision for 26 and 27, reflecting a more pronounced impact of the war on commodity markets, real incomes and also confidence. The outlook remains uncertain with upside risks for inflation and downside risks for economic growth. The full implication of the war for medium term inflation and growth will depend on the intensity and duration of the energy price shock, as well as the scale of its indirect and second round effects. This uncertainty is also reflected in the broad range of outcomes for inflation and growth in the updated illustrative scenarios put together by Euro system staff. These will be published with the staff projections on our website. With today's decision, we remain well positioned to navigate the uncertainty caused by the war. We will closely monitor the situation and follow a data dependent and meeting by meeting approach to determining the appropriate monetary policy stance. In particular, our interest rate decisions will be based on our assessment of inflation outlook and the risks surrounding it. In light of the incoming economic and financial data, as well as the dynamics of underlying inflation and the strength of monetary policy transmission, we are not pre-committing to a particular rate path. The decisions taken out to taken today are set out in a press release available on our website. So I will now outline in more detail how we see the economy and inflation developing and we'll then explain our assessment of financial and monetary conditions.
Let me first look at the economic activity. Adjusting for a temporary factor in Ireland, the Euro area economy grew in the first quarter, supported by domestic demand and exports. Yet, the war in the Middle East is weighing on activity and surveys are pointing to a slowdown, especially in services. Manufacturing has held up so far. In part, this is because firms have been building up stocks to cope with supply chain pressures. It also reflects higher defense spending. The labor market remains resilient. Unemployment at 6.3% in April remains close to historical lows. The first quarter saw additional jobs being created, although at a slower pace than in the last quarter in 2025 Labor demand has cooled further, and firms and households expect the labor market to weaken. Looking ahead, staff now expect domestic demand to be weaker than they projected in March, as the war weighs on confidence and higher energy costs erode real incomes. At the same time, household balance sheets are solid overall, and consumption should remain the main driver of growth. Higher energy costs and lower confidence will dent private investment in the short run, but it should be underpinned by firms investing in new digital technologies. Government spending more on defence and infrastructure should continue to support public investments. These factors are expected to provide some cushioning against the fallout from the war.
The Governing Council highlights the urgent need to strengthen the Euro area economy while maintaining sound public finances. Fiscal sustainability is a crucial anchor for broader economic stability. Fiscal responses to the energy price shock should be temporary, targeted and tailored. As emphasized in the European Commission 2026 European Semester Spring Package, reforms to enhance the Euro area's growth potential and accelerate the energy transition to reduce reliance on fossil fuels are more vital than ever. Completing the savings and investment union is key to funding innovation, supporting the green and digital transition, and improving productivity. The digital euro and tokenized wholesale central bank money will enhance Europe's strategic autonomy, competitiveness and financial integration, and will boost innovation in payments. It is thus essential to swiftly adopt the regulation on the establishment of the digital euro. Simplifying and harmonizing rules across the EU's single market will help European firms grow faster.