Lagarde speech: We're not seeing any second round effects yet

European Central Bank (ECB) President Christine Lagarde said on Wednesday that inflation has been rising predominantly but not exclusively as a result of energy prices. Lagarde added that she’s not seeing any second round effects yet.

Key quotes

Inflation has been rising predominantly but not exclusively as a result of energy prices.

We're not seeing any second round effects yet.

We cannot wait until they are in full view but we can anticipate, look for hints.

In Europe you see anticipation of wage increases through collective barganing arrangements, we're following those entry points.

Asked about French debt, the primary and first solution lies in French fiscal policy.

Growth is not brilliant, but 1.1% growth in 2026 is not bad.

Won't run for French president.

Market reaction 

At the press time, the EUR/USD pair is up 0.06% on the day to trade at 1.1205.

Lagarde flags energy-led inflation but downplays second-round risks

ECB President Lagarde’s 4.6/10 FXS Speechtracker score sits notably below the historic 5.6/10 baseline, pointing to a mildly more cautious and less forceful tone than usual. By stressing that inflation is predominantly energy-driven and that second-round effects are not yet visible, while still warning the ECB cannot wait for them to be “in full view,” the speech leans slightly hawkish on vigilance but stops short of signaling aggressive tightening.

Lagarde’s focus on anticipated wage increases via collective bargaining and the need for French fiscal policy to address French debt underscores a preference for targeted vigilance and fiscal responsibility rather than broad-based monetary tightening. The acknowledgment that Euro area growth at 1.1% in 2026 is “not brilliant” but “not bad” reinforces a balanced stance, suggesting limited immediate impact on Euro direction, with markets likely to interpret the speech as watchful but not decisively hawkish.