In an interview published in Le Figaro on Sunday, ECB President Christine Lagarde said , “At the next meeting in September, there could be a further hike of the policy rate or perhaps a pause.”

But, she further clarified that “a pause, whenever it occurs, in September or later, would not necessarily be definitive.” This suggests that the ECB remains flexible in its approach to policy adjustments, committed to assessing the economic landscape on a meeting-by-meeting basis.

Elucidating on ECB’s mandate, Lagarde said, “We are committed to returning inflation to our target in a timely manner and for this we need a sufficiently restrictive policy in terms of level and length.”

On a more positive note, Lagarde pointed out that recent Q2 GDP figures for France, Germany, and Spain were “quite encouraging.” These data points, she suggested, lend support to their projection of a 0.9% GDP growth in Eurozone this year.

Several top ECB policymakers have today voiced their thoughts on the future of the bank’s interest rate hikes, highlighting a variety of perspectives.

Yannis Stournaras, Chief of Greek Central Bank, hinted towards the nearing end of interest rate increases, stating, “It looks like we are very close to the end of interest rate rises.” While he doesn’t completely rule out another possible hike in September, he noted, “if there is one further – I see it difficult – in September, I believe we will stop there.”

However, Slovakia’s Central Bank Head Peter Kazimir suggested a less definitive stance, indicating a pause rather than an outright end to the cycle of rate increases. “Even if we were to take a break in September, it would be premature to consider it automatically…the end of the cycle,” Kazimir opined, further adding, “We are looking for the right place to stay for a large part of next year…And you will recognize that it has to be a place where we all must like it a little.”

Adding a nuanced perspective to the discourse, Francois Villeroy de Galhau, head of French Central Bank, expressed the ECB’s growing confidence that it will achieve its 2% inflation target by 2025, attributing this confidence to the effective transmission of rate hikes to the broader economy.

Villeroy emphasized the need for continued perseverance and pragmatism, stating, “Given the time needed for this full transmission, perseverance is now the prime key virtue. Pragmatism is second – decisions at our next meetings will be open and entirely data driven.”

ECB President Christine Lagarde, struck a somber tone during the post-meeting press conference. She acknowledged that the economic outlook for Eurozone has “deteriorated” in the near term, citing persistent high inflation and tighter financial conditions as key factors pressuring the manufacturing output.

Lagarde stated, “High inflation and tighter financing… is weighing especially on manufacturing output, which is also being held down by weak external demand.” Though she noted the resilience in the services sector, she cautioned that its “momentum is slowing”. The economy is expected to “remain weak in the short run.”

She then noted a shift in the drivers of inflation. External sources are easing, she noted, but domestic price pressures, including from rising wages and robust profit margins, are gaining prominence. “While some measures are moving lower, underlying inflation remains high overall,” Lagarde pointed out.