European Central Bank President Christine Lagarde stated that the economy demonstrated resilience in the second quarter despite the adverse effects of the energy shock. Speaking at a press conference in Berlin on Thursday, she noted that growth was broad-based across sectors and countries, with momentum potentially carrying into the third quarter. Recent prospects for economic expansion have improved, though employment growth continues to slow.

Lagarde highlighted that downside risks to the growth outlook persist, driven particularly by developments in the Middle East conflict and Russia's unprovoked war against Ukraine. She also indicated that inflation is expected to remain well above target until the first half of 2027, with upside risks to the inflation outlook. The energy shock could intensify further, potentially exerting stronger-than-anticipated effects on other prices and wages.

The discussion at this meeting focused squarely on the latest policy decision, with no deliberation on the future policy path, Lagarde confirmed. She emphasized that the Governing Council adheres rigorously to its established policy framework, adding that no probabilities of various scenarios were debated. The decision to raise interest rates was unanimous, and Lagarde stated she had no announcements to make regarding her own future.

Lagarde defended the rate hike as viable across all three scenarios outlined by the central bank. "We once again set out a mild scenario, an adverse scenario, and a severe scenario," she explained, with the ECB focusing primarily on a significant shock source: energy prices. "In all three scenarios, our decision to raise rates by 25 basis points stands up to scrutiny," she concluded.