The decision was unanimous. It was expected.

Let's go through what Christine Lagarde said in the press conference, because she spent the time making the case against her own decision.

Asked to explain the framework, she described the situation in Europe as "predominantly a supply shock." Exactly. Europe has an energy problem, not a demand problem.

Then the monetary policy statement said this: wages do not show a material response to the energy shock at this stage. Compensation per employee grew 3.3% in the second quarter, down from 3.5% in the first. Unit labor costs slowed to 2.6% from 3.5%.

And on food prices, steady at 1.2%. 

So, Lagarde says it's a supply shock. No wage pressures. Falling unit labor costs. No second round effects visible anywhere in the data.

And yet the ECB delivered a unanimous rate hike.

Now remember what Scott Bessent said from Asheville two weeks ago: "traditionally, you don't raise into a supply shock unless you see second or third order effects."

So, the ECB ignored that, and ignored its own history of policy mistakes under similar conditions.

Meanwhile, a reporter in the room pointed out that the ECB's own June adverse scenario for energy prices assumed European gas at €60.

They moved the goalposts on the macroeconomic projections report they released today. They now see €60 as the baseline scenario for European gas. The adverse scenario assumed €77 and the severe scenario is at €130.

Gas is now at €82 — already above the adverse scenario.

That's growth destructive, and the scenario analysis does not factor in tightening by the ECB (which they did today).

Now, what's also interesting in this report, they didn't model a problem in the sovereign debt market.

They talked about risk sensitivity to these scenarios in corporate bond spreads, bank equity, bank bond spreads, lending spreads, but nothing on sovereign debt vulnerability.

So, if the gas price shock becomes severe, the ECB seems to want the market to believe that their standing threat to backstop the fiscally fragile sovereign bond markets in Europe will be sufficient (such, that it's not even worth discussing in the report).

But as we've discussed for much of the past year, the ECB backstop only works when major global central banks are coordinating (namely the Fed is behind you). And the Warsh-led Fed is unlikely to be there, unless political conditions are met (alignment).