IMFC Statement

Statement by Christine Lagarde, President of the ECB, at the Fifty-Third Meeting of the International Monetary and Financial Committee.

The global economy faces a complex landscape marked by uncertainty. Efforts to stimulate growth through investments in artificial intelligence and fiscal measures are being countered by geopolitical tensions and trade conflicts, which pose risks to economic stability. The ongoing war in the Middle East has significantly affected global energy prices, further muddying the recovery path while contributing to inflationary pressures. In addition, the ramifications of Russia’s aggressive actions against Ukraine continue to loom large, impacting the international economic environment.

Economic Activity

In the euro area, the implications of the Middle Eastern conflict are contingent upon both its duration and intensity. It is crucial to transition towards a more energy-independent economy, which will foster competitiveness and resilience. The region entered this uncertain phase with a reasonably robust economic footing, with a growth rate of 1.4% in 2025 driven by rising real incomes and low unemployment. Business investments, particularly in digital innovation, and increased activity in construction have also contributed positively, though net exports faced pressures from evolving global trade policies.

Current ECB staff projections suggest real GDP growth of 0.9% for 2026, improving slightly in subsequent years. However, these estimates are based on the assumption that the geopolitical conflicts remain contained. Should energy disruptions persist, growth may be further affected. Acknowledging these potential risks, the euro area must enhance its energy strategies and foster transitional policies to mitigate reliance on fossil fuels and bolster economic stability.

Inflation

Headline inflation has escalated, moving to 2.6% in March, attributed primarily to rising energy costs, while core inflation, which excludes energy and food, has slightly softened to 2.3%. The recent ECB projections anticipate an inflation rate averaging 2.6% for 2026. The ongoing geopolitical strife, particularly in the Middle East, casts a shadow over the inflation outlook, with the potential for prices to climb if both wage growth and inflation expectations increase more than currently anticipated. Conversely, if the economic fallout subsides swiftly, inflation may remain lower than anticipated.

Monetary Policy

The Governing Council has chosen to maintain the current key ECB interest rates as a strategic move to stabilize inflation at the targeted 2% in the medium term. The unpredictable nature of the current geopolitical climate underscores the necessity for a responsive monetary policy that effectively navigates the fluctuating inflation and growth prospects.

Financial Stability

Euro area financial stability remains susceptible to heightened geopolitical considerations and overall uncertainty within global markets. Although the banking sector has demonstrated robust resilience, potential vulnerabilities arise from increasing credit risks in energy-dependent and import-sensitive segments. Regulatory frameworks must be bolstered to ensure system-wide protection against financial disintegration due to international instabilities.

Payment Systems

The Eurosystem has articulated a comprehensive payment strategy, aiming to integrate traditional banking functions with the innovative requirements of the digital landscape. The introduction of the digital euro represents a significant leap towards facilitating transactions across the euro area while fostering a competitive payment infrastructure that is essential in the modern economic context.

International Cooperation

In the face of considerable economic challenges, maintaining robust multilateral cooperation is crucial. The ECB remains committed to supporting the IMF’s initiatives aimed at ensuring global economic stability, including the evaluation of external imbalances and the enhancement of regulatory frameworks across nations.