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← Economic Fallout

ECB's Lagarde says bond selloff will slow inflation through tighter financing conditions

Confirmed1 source · Oct 17, 2026

Rising bond yields across the eurozone will reduce economic growth and dampen inflation pass-through more than the ECB projected in September, according to president Christine Lagarde.

What happened

ECB President Christine Lagarde told central bankers and finance ministers in Bangkok on October 17 that the global bond selloff has made borrowing more expensive in the eurozone, which will slow growth and reduce the inflationary impact of higher fuel prices. Long-term interest rates have risen notably since the ECB's September meeting. Fellow ECB policymaker Joachim Nagel stated the fight against inflation is not complete, while Olli Rehn warned the ECB will monitor for second-round effects of energy inflation on wages and other prices.

Context

The ECB has raised rates twice in the past four months and expects another increase in December that would bring its policy rate to 2.75%, a level it considers restrictive. Bond yields have surged globally due to concerns about debt levels, inflation, and competition for credit from AI investments, with France among the hardest hit. The tightening of financing conditions represents a brake on the ECB's original September forecast for how much fuel price increases would feed into broader inflation, as higher borrowing costs reduce consumer and business spending capacity.