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Christine Lagarde told the IMF’s International Monetary and Financial Committee on October 17 that the global economy and euro area had remained resilient, but energy-market disruption posed risks to growth and inflation. She cited September ECB projections for euro-area growth and said the ECB had raised rates in June and September as it assessed the energy shock.
European Central Bank President Christine Lagarde told the International Monetary and Financial Committee on October 17 that the global economy had weathered high uncertainty so far, while conflict in the Middle East and related energy-market swings posed risks to both growth and inflation. Her statement also set out the ECB’s outlook for the euro area and explained the reasoning behind its 25-basis-point rate increases in June and September.
Lagarde said euro-area activity had proved resilient despite global headwinds and the energy shock, with growth broad-based across most countries and sectors in the first half of 2026. The ECB’s September staff projections put euro-area growth at 0.9% in 2026, 1.4% in 2027 and 1.5% in 2028. Those are projections, not reported final growth outcomes.
Inflation had risen: headline inflation reached 3.8% in September, mainly because of higher energy inflation, while core inflation rose slightly to 2.5%. Lagarde said underlying inflation measures were broadly stable and wages had not yet shown a material response to the energy shock. The ECB expected energy prices to keep headline inflation well above its target into the first half of 2027, with inflation returning to around target toward the end of that year.
The statement said the ECB Governing Council had raised its key interest rates by 25 basis points in September, following an equal increase in June, as discussed in Lagarde’s monetary policy statement. Lagarde said policymakers would weigh the inflation outlook, underlying inflation and the strength of monetary-policy transmission when making future decisions, themes also covered in her interview with Ouest-France. She also reported that more than 30 central banks had expressed interest in the enhanced EUREP repo facility during the previous six months.
Energy Shock Shapes ECB Policy
The statement matters because energy costs can affect household purchasing power, business expenses and the wider price outlook. If the shock persists, it could make inflation harder to contain while also weighing on economic activity. Lagarde said the risks to growth were tilted downward and those to inflation upward, putting the ECB in a position where it must respond to price pressures without disregarding weaker growth.
For households and businesses, the projections point to an extended period of elevated headline inflation, though the ECB’s expected return toward target remains a forecast. The policy signal is also relevant to borrowers and investors: the ECB has recently raised rates, but Lagarde did not announce a future move. She said decisions would depend on incoming data and the bank’s stated assessment framework.
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The ECB’s September Outlook
Lagarde delivered the statement at the 54th meeting of the International Monetary and Financial Committee, during the IMF Annual Meetings. The speech addressed the global outlook as well as euro-area conditions. She described trade tensions and protectionist measures as weighing on confidence and changing trade flows, while investment in artificial intelligence was supporting activity and trade in economies connected to technology supply chains.
For the euro area, the ECB’s September projections anticipated support from recovering real incomes as energy inflation eased, a resilient labour market, government infrastructure and defence spending, and investment in AI and digital technology. Lagarde also pointed to uncertainty about the intensity and duration of the Middle East conflict and how its effects might spread through the economy. The ECB’s rate increases in June and September came against that backdrop of rising energy-related inflation risks.
“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 and Inflation Risks
The statement does not establish how long or how severely the Middle East conflict will affect energy markets. Lagarde said that a more intense or persistent energy shock could increase indirect price effects and make inflation more persistent; those outcomes were presented as risks, not certainties. The outlook could also change if geopolitical conditions improve, energy-price pass-through is weaker than expected, or financial markets become more risk-averse.
It remains unclear from the statement how inflation and growth will develop beyond the projections, or what the ECB’s next rate decision will be. Lagarde reported no material wage response to the shock so far, but future wage and price developments will depend on incoming data. The statement also included a heading on financial stability but the supplied material provides no details under that heading, so no specific assessment of financial vulnerabilities can be reported here.
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Data Will Guide Rate Decisions
The ECB Governing Council will continue to assess incoming economic and financial data against its three stated criteria: the inflation outlook and its risks, underlying inflation dynamics, and the strength of monetary-policy transmission. Lagarde said future decisions would follow that reaction function; her statement did not specify a date or size for any further rate move.
In the coming months, developments in energy prices, inflation readings, wages, financing conditions and the conflict will help show whether the September outlook remains on track. The ECB’s projections anticipate headline inflation easing after the first quarter of 2027 and moving toward target near year-end, but the statement makes clear that this path is exposed to geopolitical and energy-market uncertainty.
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Key Questions
What did Christine Lagarde tell the IMFC?
She said the global economy and euro area had shown resilience, while warning that Middle East conflict and energy-market volatility threatened growth and could keep inflation elevated.
What growth does the ECB project for the euro area?
The ECB’s September staff projections forecast growth of 0.9% in 2026, 1.4% in 2027 and 1.5% in 2028. These are projections, not final results.
What did Lagarde say about inflation?
She said headline inflation was 3.8% in September and core inflation was 2.5%. The ECB expected higher energy prices to keep headline inflation above target into the first half of 2027, before a projected decline toward target near the end of that year.
Did Lagarde announce another ECB rate increase?
No. She described the 25-basis-point increases in June and September and said future decisions would depend on the ECB’s assessment of incoming data. The statement did not announce another rate change.
Source: primary
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