A new intervention by the President of the European Central Bank to reassure observers and stakeholders on market trends and economic indices of the euro area, with an eye to the banking system of the European Union. "We expect inflation in the euro area to continue to decline" as price pressures ease and demand effects from tight monetary policy. Christine Lagarde said this in her speech at the IMF spring meeting in Washington.
"With inflation too high for too long, the ECB decided in March to raise rates by 50 basis points, bringing total increases from July 2022 to 350 basis points. The hikes highlight our determination to ensure inflation returns to its medium-term target of 2%," notes economist French.
"The euro area banking system is resilient, with solid capital and liquidity positions," Lagarde said. The ECB has the tools to provide liquidity to the euro area financial system if needed. "We closely monitor market tensions and stand ready to respond as necessary to preserve price stability and financial stability," she said.
Risks to the economic growth outlook in Euroland are on the downside, Christine Lagarde added, stressing that persistent and high tensions in financial markets could translate into a stronger-than-expected credit crunch and weigh on confidence. "Russia's unjustified war in Ukraine continues to be a significant downside risk to the economy. Growth in the euro area could also be weighed down by a more pronounced than expected slowdown in the world economy," Lagarde said.