ECB President’s statement on global economic outlook and monetary policy

Christine Lagarde, President of the European Central Bank (ECB), delivered a statement at the fifty-third meeting of the International Monetary and Financial Committee.

The global economy faces turbulence due to geopolitical tensions, trade frictions, and the war in the Middle East, which has increased energy prices and posed risks to growth and inflation. Uncertainty remains high, especially regarding Russia’s conflict with Ukraine.

For the euro area, economic activity grew by 1.4% in 2025, supported by rising incomes, low unemployment, and increased investment in digital technologies. The ECB projects real GDP growth of 0.9% in 2026, with alternative scenarios considering energy disruptions. Risks to growth are mainly downside, influenced by geopolitical tensions and financial conditions.

Inflation rose to 2.6% in March, driven by energy prices, with core inflation at 2.3%. Inflation expectations remain aligned with the ECB’s 2% target. The ECB’s projections estimate inflation at 2.6% in 2026, with risks tilted to the upside due to energy market disruptions. Wage growth is slowing, supporting easing labor costs.

In March, the ECB Governing Council maintained interest rates, emphasizing a data-dependent approach amid uncertainties from the war. The ECB also enhanced the Eurosystem repo facility (EUREP) to support liquidity amid global volatility, effective from the third quarter of 2026.

Financial stability remains resilient but faces risks from geopolitical tensions, energy disruptions, and market volatility. The banking system is well-capitalized, but rising credit risks among energy-intensive firms could strain asset quality. Regulatory efforts and international cooperation are vital to maintaining resilience.

The Eurosystem’s new payments strategy aims to adapt to digital innovations, including the digital euro, and support private sector initiatives. Projects like Pontes and Appia will facilitate secure, scalable digital asset settlement using distributed ledger technology, strengthening Europe’s digital economy.

On international cooperation, the ECB emphasizes the importance of multilateral institutions like the IMF in ensuring global macroeconomic and financial stability. The ECB supports IMF efforts in surveillance, financial innovation, and macro-critical risk assessment.