Lagarde says ECB raised rates 25 bps as AI shifts outlook

The European Central Bank raised its three key interest rates by 25 basis points at its monetary policy meeting earlier this month, and Christine Lagarde used a hearing in Brussels on 28 September 2026 to link that decision to an economy that is still resilient and to the growing role of artificial intelligence.

Lagarde said firms are set to devote around 10% of total investment to AI in 2026, while AI-related borrowing already accounts for roughly a quarter of credit growth to firms. She said AI could significantly enhance Europe’s productivity, competitiveness and living standards, but that it is also already affecting investment, labour markets and inflation.

On the euro area economy, she said growth was solid in the second quarter of 2026 and expected to have continued in the third quarter. She also said unemployment stood at 6.4% in July, headline inflation rose to 3.2% in August from 2.9% in July, and the September ECB staff projections see growth of 0.9% in 2026, 1.4% in 2027 and 1.5% in 2028.

She said inflation excluding energy and food edged down to 2.4% in August, while compensation per employee stood at 3.3% in the second quarter, down from 3.6% in the first quarter. Lagarde also said the baseline of the September ECB staff projections sees headline inflation averaging 3.0% in 2026, 2.5% in 2027 and 2.1% in 2028.

Lagarde said the ECB sees higher inflation ahead but no signs yet that it is becoming embedded, and she said the central bank remains in the “middle path” for monetary policy. She said the task now is to observe and study how AI affects productivity, investment, labour markets, financial conditions and inflation, while Europe works to enable innovation, build greater independence and deploy AI more intensively.