ECB President’s speech on euro area economy and inflation perceptions

Christine Lagarde, President of the European Central Bank (ECB), delivered a speech at the hearing of the Committee on Economic and Monetary Affairs of the European Parliament.

She highlighted that this week marks four years since Russia’s aggression against Ukraine, expressing solidarity with Ukraine and those affected by the war.

The euro area has faced high inflation and challenging economic conditions in recent years. Inflation peaked at 10.6% in October 2022 and has since decreased to 1.7% in January 2026, aided by the ECB’s monetary policy measures.

Despite the decline, surveys indicate that many citizens perceive prices to be rising faster than official data suggest. This divergence between perceived and measured inflation influences economic behavior, expectations, and trust in institutions.

Lagarde explained that perceptions are shaped by personal experiences, demographic factors, and psychological biases, such as focusing more on price increases. Food inflation, which has been above overall inflation since mid-2022, significantly impacts perceptions.

To address this divergence, the ECB emphasizes the importance of maintaining inflation at its 2% target, improving communication strategies, and investing in financial literacy. Initiatives include accessible explanations of policies and educational content on digital platforms.

She concluded by stressing the importance of trust and cooperation between the ECB and policymakers to reinforce the legitimacy of the euro and ensure effective communication with the public.