ECB’s Philip Lane sees euro area growth holding up despite energy shock headwinds

The European Central Bank just did something that might seem contradictory at first glance: it raised its growth forecast and hiked interest rates at the same time. During the Governing Council meeting on September 10, 2026, Chief Economist Philip R. Lane laid out an economic outlook for the euro area that lands somewhere between cautious optimism and strategic hawkishness. The ECB bumped its key interest rates up by 25 basis points to 2.50%, effective September 16. Simultaneously, Lane presented revised projections showing real GDP growth for 2026 now expected to hit 0.9%, a 0.1 percentage point upgrade from the June forecast. Growth surprises to the upside, but inflation won’t quit The euro area posted 0.4% GDP growth in the second quarter of 2026, beating initial expectations. Lane’s projections extend the positive trajectory further out: 1.4% growth in 2027 and 1.5% in 2028. The domestic side of the ledger looks solid, with improved consumer and business confidence fueling spending. External competitiveness, however, remains a drag. The inflation picture is where things get thorny. HICP inflation, the ECB’s preferred gauge, is projected to average 3.0% for 2026. That’s well abo...