Episode summary
President Lagarde presents the latest monetary policy decisions – 29 October 2026
Summary
The Governing Council kept the three key ECB interest rates unchanged and said it will stay data dependent, meeting by meeting, with no precommitted rate path. The president said the bank remains focused on getting inflation back to 2% in the medium term while navigating elevated uncertainty, tighter financing conditions, and the fallout from the energy shock.
The president said euro area activity continued to expand in the third quarter, supported by services, manufacturing, digital services, exports, AI-related business investment, and government spending on infrastructure and defense. But she also said renewed energy price increases are hitting consumer confidence and higher financing costs are likely to weigh on growth. Unemployment held at 6.4% in August, while wage growth remained moderate.
Inflation rose to 3.8% in September from 3.2% in August, driven mainly by energy, while core measures stayed broadly stable. The president argued that inflation is likely to stay above target in the near term before gradually returning toward 2%, but warned that upside risks remain from geopolitics, trade tensions, supply disruptions, and extreme weather. Financial conditions have tightened, with higher market rates, weaker loan demand, and slower bank lending to firms and households.
Key takeaways
- The ECB kept all three key policy rates unchanged and signaled no preset path for future moves.
- The president said energy prices are the main upside risk to inflation and a downside risk to growth.
- Euro area GDP still expanded in the third quarter, helped by services, exports, AI-related investment, and public spending.
- Inflation rose to 3.8% in September, with energy inflation surging to 18.9% from 14.3% in August.
- Financial conditions tightened, as market rates rose, stock prices fell, and lending growth slowed.
Notable quotes
“The governing council today decided to keep the three key ECB interest rates unchanged”
“We are committed to setting monetary policy to ensure that inflation stabilizes at our 2% target in the medium term”
“The incoming data suggest that the Euro area economy continued to expand in the third quarter of the year”
“Inflation rose to 3.8% in September from 3.2% in August”
“financial conditions have tightened since our previous meeting. Interest rates have broadly moved up while stock prices have fallen”
How the episode opens
You're listening to Euro Matters, the European Central Bank podcast. It's Thursday, the 29th of October, 2026, and today the European Central Bank's governing council took its latest monetary policy decisions. Listen as President Christine Lagard explains those decisions in our press conference.
The vice president and I welcome you to our press conference. The governing council today decided to keep the three key ECB interest rates unchanged. Energy prices have continued to rise, posing upside risks to the inflation outlook and downside risks to the growth outlook.
While the full effects of the energy shock are still unfolding, underlying inflation has remained broadly stable so far and wages do not show a material response at this stage. The increased magnitude and duration of the energy shock as well as the implications for indirect and second round effects are likely to drive up inflation and lower growth. Financing conditions have tightened since our last meeting, which is likely to weigh on inflation and growth.
We are committed to setting monetary policy to ensure that inflation stabilizes at our 2% target in the medium term. We remain well positioned to navigate the current elevated uncertainty. We will 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 the 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 precommitting to a particular rate path. The decisions taken today are set out in a press release that is available on our website.
And I will now outline in more detail how we see the economy and inflation developing and will then explain our assessment of financial and monetary conditions.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- european central bank monetary policy
- inflation outlook
- economic performance
- financial conditions
- press conference
Watch the episode
Watch “President Lagarde presents the latest monetary policy decisions – 29 October 2026” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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