Lagarde Says Eurozone Inflation Will Stay High as December Rate Hike Stays on the Table
Direct answer
European Central Bank President Christine Lagarde said eurozone inflation will stay high for the quarters to come, and it would take significant changes to stop the bank from raising interest rates again in December. She did not commit to a December hike, but her message was that the direction of travel is still toward higher rates unless the data changes.
What happened
Lagarde gave an interview to Japan’s Yomiuri Shimbun newspaper, conducted on November 4 and published on Saturday, November 7, 2026. The European Central Bank published the full transcript on its own website the same day.
“We know that inflation numbers will remain high in the quarters to come,” Lagarde told the newspaper. She added that the longer prices stay high, the greater the risk to the bank’s medium term target of inflation around 2%.
The numbers behind her warning are stark. Headline inflation in the eurozone was 4% in October, higher than the bank had expected a few months earlier, though in line with what markets expected. That is about double the bank’s 2% target. Energy inflation climbed to 20.8%, up from 18.9% in September, driven by the conflict in the Middle East and less global refinery capacity. Core inflation, which leaves out energy, food, alcohol and tobacco, was 2.5% in October, unchanged from September.
On the December decision, Lagarde was careful. “So, I cannot tell you today that we will for sure do this in December,” she said. “What I know is that, on the basis of the information we have today, it would take significant changes for the direction of travel to be different from what I expect.”
She also said the bank is not yet seeing second round effects beyond what it has already built into its forecasts. Second round effects are what happen when higher prices feed into higher wages, and then into higher prices again. Lagarde said the bank is watching forward looking indicators closely, including multi year wage agreements and what companies expect wages to do.
The remarks follow comments Lagarde made on November 5 at a financial literacy conference in Milan, where she said the bank will have many indicators before December to help decide whether a hike is necessary, and that the bank must use its tools because it does not want inflation expectations to run away.
The ECB debated a rate rise at its October 29 meeting but decided unanimously to hold its deposit rate at 2.50%. A 25 basis point increase in December would be the third hike of the current cycle, after rises in June and September. Several policymakers, including the heads of the German and Italian central banks, have already signalled that a December move may be likely.
Why it matters for beginners
A central bank rate is the key price of borrowing in an economy. When it rises, loans and mortgages tend to become more expensive, while saving can become more rewarding. When the bank signals more rises may come, markets and banks start to price that in, even before the decision is made.
This story matters because it shows how a central bank talks when it is leaning toward a hike but has not decided yet. Lagarde did not promise a December rise. She said the decision will be made meeting by meeting, on the basis of incoming data. But by saying it would take significant changes to alter the direction of travel, she told markets that a hike is still the base case.
For beginners, the energy point is worth understanding. Energy inflation at 20.8% is doing most of the damage to the headline number. The bank’s worry is not just today’s energy prices, but whether they spread into wages and everyday prices. So far, Lagarde said, that spread has not happened beyond what the bank expected. That is why the bank is watching wage deals so closely.
What to watch next
The ECB’s December meeting is the next decision point, when new staff economic projections will give policymakers fresh inflation and growth forecasts. It will be one of Lagarde’s last meetings: she has announced she will step down on February 7, 2027, about nine months before her term formally ends.
Watch the eurozone inflation data due before that meeting, especially energy prices and any sign of wage growth picking up. If inflation cools and energy prices fall back, the case for a hike weakens. If prices stay high and wage deals come in strong, a December hike becomes more likely.
Also watch who will succeed Lagarde. The Eurogroup has confirmed that Dutch central bank governor Klaas Knot and Spanish central bank governor Pablo Hernandez de Cos are the leading candidates, and EU leaders aim to name the next ECB president at a December summit.
FAQ
Who is Christine Lagarde?
She is the President of the European Central Bank. She has announced she will step down on February 7, 2027, about nine months before her term formally ends.
Will the ECB definitely raise rates in December?
No. Lagarde said she cannot say for certain that the bank will move in December. The decision will depend on incoming data, and it would take significant changes in that data to alter the direction she expects.
What is headline inflation?
It is the overall rate at which prices are rising across the economy, measured by the consumer price index. In the eurozone it was 4% in October 2026, about double the ECB’s target of around 2%.
What is core inflation?
It is inflation with energy, food, alcohol and tobacco stripped out. It was 2.5% in October, unchanged from September. Central banks watch it because it shows whether price rises are spreading beyond energy and food.
What are second round effects?
They happen when higher prices lead workers to ask for higher pay, firms then raise prices to cover higher wage costs, and inflation stays high. Lagarde said the ECB is not seeing these effects beyond what it already expected.
What is the ECB deposit rate now?
It is 2.50%, after the bank held rates steady on October 29, 2026. A 25 basis point rise in December would take it to 2.75%.
Sources
European Central Bank, November 7, 2026, “Interview with Yomiuri Shimbun”, https://www.ecb.europa.eu/press/inter/date/2026/html/ecb.in261107~e7b86fc4ce.en.html
Econostream, November 7, 2026, “ECB’s Lagarde: Significant Changes Needed to Shift Expected Policy Course”, https://www.econostream-media.com/news/2026-11-07/ecb’s_lagarde:_significant_changes_needed_to_shift_expected_policy_course.html
This article is for general information and education only. It is not legal or financial advice.
