The President of the European Central Bank (ECB), Christine Lagarde, today argued that monetary policy can “return to the core” with interest rates as the main instrument, even in a different context marked by various shocks to the economy.
© Lusa
29/06/2026
by
Lusa
“Jwe do not need to resort to non-conventional instruments”, but rather to focus on “stabilizing inflation with the leading interest rates as the main instrument”, said in the opening speech of the ECB Forum, which started today and takes place until Wednesday in Sintra, Portugal.
For Lagarde, it is possible to adjust interest rates “in a proportionate manner, calibrating them according to shocks”, and no “complex forms of indication on the future direction of monetary policy”.
This “return to the core” defended by the ECB’s manager comes at a time when interest is already further from the lower limit, and shocks are more likely to affect the supply side than the demand side.
In addition, Europe has built a policy framework in response to crises that made the economy more shock-resilient, it considered, reducing the need for unconventional or vigorous policy responses, it argued.
The transmission of shocks to the real economy has also been more controlled, notably with the transition to clean energy, as in countries with higher percentages of low carbon electricity, “the wholesale prices of electricity are increasingly dissociated from gas prices,” Lagarde said, highlighting the examples of Portugal and Spain.
Thus, in this framework, “the space has been created for monetary policy to return to the core,” the ECB leader defended, taking into account “stabilization of inflation, with key key interest rates, weighted action and decision-making meeting by meeting”.
However, Lagarde pointed out that it is not all the same as the past, and the frequency of great shocks “seems to be increasing”, these take different forms and are also of more “fast fading”.
It is recalled that at the last meeting on 11 June, the ECB decided to raise interest rates by 25 basis points to 2.25%, in the one which was the first increase in principal rates in almost three years since September 2023.
The Forum is an annual event organised by the ECB and held in Sintra, which brings together central bank governors, academics and financial market representatives.
This year’s theme is “Molding Europe’s Future: Innovation, Growth and Stability”.