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In a statement to the IMF’s International Monetary and Financial Committee on October 17, 2026, ECB President Christine Lagarde said the global economy had remained resilient but faced downside growth risks and upside inflation risks. She cited September euro area inflation of 3.8% and said the ECB would continue to set interest rates using incoming data and its established reaction function.
European Central Bank President Christine Lagarde told the IMF’s International Monetary and Financial Committee on October 17 that the global economy had held up despite geopolitical and trade pressures, while warning that risks remained tilted toward slower growth and higher inflation. Her statement set out the ECB’s outlook for the euro area, where energy prices have pushed inflation higher and the Governing Council raised interest rates in June and September.
Lagarde said the euro area economy had shown resilience, with growth broad-based across most countries and sectors during the first half of 2026. The ECB’s September staff projections forecast growth of 0.9% in 2026, 1.4% in 2027 and 1.5% in 2028. The statement linked expected support for demand to recovering real incomes, a resilient labour market, public infrastructure and defence spending, and investment in artificial intelligence and digital technologies.
Inflation has risen alongside energy costs. Euro area headline inflation reached 3.8% in September, which Lagarde said mainly reflected a surge in energy inflation, with smaller increases in food and services. Core inflation rose slightly to 2.5%, while the range of underlying inflation measures was broadly stable and wages had not materially responded to the energy shock, according to the statement.
The ECB Governing Council raised its key interest rates by 25 basis points in September, following a rise of the same size in June. Lagarde said higher energy prices were expected to keep headline inflation well above target into the first half of 2027, before it gradually returned to around target toward the end of that year. She said the ECB would base future decisions on inflation prospects, underlying inflation and the strength of monetary policy transmission.
Energy Prices Shape ECB Choices
The statement signals the policy challenge facing the ECB: energy costs are lifting inflation, but tighter financing conditions and uncertainty also threaten growth. Lagarde said the shock was too large for policymakers simply to disregard, while describing a measured response as appropriate. That framing matters for households and businesses because interest-rate decisions affect borrowing costs, demand and the path of inflation.
The outlook also connects European economic performance to developments beyond the euro area. Lagarde pointed to the Middle East conflict, Russia’s war against Ukraine and trade restrictions as sources of uncertainty. More persistent energy disruption could feed into other prices and wages, while a sustained easing of geopolitical tensions could reduce inflation pressure, the ECB said.
For governments, Lagarde urged sound public finances and said any fiscal response to the energy shock should be temporary, targeted and tailored. She also called for policies to strengthen labour participation, workforce skills and investment, including through improved access to risk capital and wider adoption of new technologies.
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ECB Projections and Rate Decisions
The statement was delivered at the 54th meeting of the International Monetary and Financial Committee during the IMF Annual Meetings. It presents the ECB president’s account of current conditions and policy considerations; it is not a new set of ECB staff projections. The growth figures cited were published in the ECB’s September staff projections.
Lagarde said the Governing Council’s interest-rate decisions are guided by three elements: its assessment of the inflation outlook and surrounding risks, the dynamics of underlying inflation, and the strength of monetary policy transmission. She noted that long-term interest rates had risen notably since the previous meeting and that tighter financing conditions could slow growth and reduce the pass-through of energy prices more than the September projections assumed.
The statement also referred to the Eurosystem’s enhanced EUREP repo facility for central banks. The Governing Council decided on its operational features and onboarding process in July. Lagarde said more than 30 central banks had expressed interest in the past six months, and described the facility as supporting monetary-policy transmission and the international role of the euro.
“The global economy has proven surprisingly resilient in the face of high uncertainty.”
— Christine Lagarde, ECB president, in her statement to the IMFC
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Conflict Leaves Outlook Exposed
The scale and duration of the Middle East conflict, and the way resulting energy shocks may spread through the economy, remain uncertain. The statement said risks to growth were tilted to the downside and risks to inflation to the upside, but did not quantify the possible effects or set out a single forecast for alternative conflict scenarios.
It is also not yet clear how much higher energy costs will feed through to food prices, other goods and services, or wages. Lagarde said there was no evidence at that stage of significant pass-through to other prices and wages beyond what was already included in the ECB projections. That assessment could change as new data arrive. The statement identifies monetary-policy criteria but does not commit the ECB to a specific future rate path.
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Incoming Data Will Guide Policy
The ECB’s next policy decisions will depend on incoming economic and financial information assessed against its stated reaction function. That includes developments in energy prices, underlying inflation and financing conditions, as well as evidence of any further pass-through into prices and wages. The statement gives no date for a future decision or indication of whether rates will rise, fall or remain unchanged.
The inflation path described by Lagarde points to headline inflation staying above target into the first half of 2027 and moving back toward target around the end of 2027, according to the ECB’s outlook. Actual outcomes will depend in part on the duration of geopolitical shocks and energy-price movements. Governments’ fiscal responses and progress on investment and structural policies will also remain part of the broader economic picture.
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Key Questions
What did Christine Lagarde say at the IMFC meeting?
She said the global and euro area economies had been resilient but faced significant uncertainty. She highlighted energy-driven inflation risks, downside risks to growth and the ECB’s data-based approach to interest-rate decisions.
What are the ECB’s euro area growth forecasts?
The ECB’s September staff projections, cited by Lagarde, forecast euro area growth of 0.9% in 2026, 1.4% in 2027 and 1.5% in 2028.
Why has euro area inflation risen?
Lagarde said headline inflation reached 3.8% in September 2026, mostly because of a surge in energy inflation, with smaller increases in food and services inflation. Core inflation was 2.5%.
Did Lagarde announce a new ECB rate decision?
No new rate decision was announced in the statement. It reported that the Governing Council had raised rates by 25 basis points in September, after an increase of the same size in June, and said future decisions would depend on incoming data.
What remains uncertain about the inflation outlook?
The duration and intensity of the Middle East conflict and its effects on energy markets remain unclear. The extent to which energy costs may feed through to other prices and wages is also uncertain.
Source: primary
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