Lagarde warns of growing uncertainty: ‘it is more difficult to operate, but we are ready’

Brussels – The situation has changed, and not for the better. Looking ahead, there are no signs of improvement. It is useless to beat around the bush, and the president of the European Central Bank, Christine Lagarde, avoids doing so. On the contrary, she is straightforward: “The environment in which we operate will remain highly uncertain and potentially more volatile. This will make it more challenging to conduct our monetary policy and fulfill our mandate to keep prices stable.”

These are complex times, and not just today, she said during the press conference in Sintra (Portugal) at the end of the Governing Council meeting to assess the ECB’s strategy. Over the last four years, Lagarde recalls, “Not only did we see inflation surge, but some fundamental structural features of our economy and the inflation environment are changing: geopolitics, digitalization, the increasing use of artificial intelligence, demographics, the threat to environmental sustainability and the evolution of the international financial system.” All this raises questions to which it is difficult to give answers.

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“This is our core message to the euro area citizens we serve: the new environment gives many reasons to worry,” Lagarde admits. Still, she reassures: ‘One thing they do not need to worry about is our commitment to price stability.” The ECB does not intend to retreat an inch, and the Eurotower president makes this clear when she stresses that “The ECB is committed to its mandate and will keep itself and its tools updated to be able to respond to new challenges.” She then further reassures: “We are prepared for all circumstances, both to respond to downside and upside factors.”

The Governing Council confirms the 2 percent medium-term inflation target, and, for this reason, all instruments remain in place, at the disposal of the EU institution, with the Eurotower reserving the right to choose whether, how, and when to use them to respond effectively and flexibly to possible new shocks. The first of these choices will undoubtedly be on interest rates at the 24 July meeting. The ECB could decide to leave them unchanged to postpone the actual decision until after the summer at the meeting on 11 September.