Lagarde: Inflation Is ECB’s Main Priority, but Beware of Climate, Digital and Geopolitical Challenges

24 May 2023

By Xavier D’Arcy – FRANKFURT (Econostream) – The European Central Bank’s most immediate goal is to fight high inflation, but it also faces a number of other challenges, such as the climate crisis, geopolitical tensions and the digital transformation, ECB President Christine Lagarde said on Wednesday.

Speaking at the ECB’s 25th anniversary celebrations, she said that ‘our immediate and overriding priority is to bring inflation back down to our 2% medium-term target in a timely manner. And we will do so. But as I recently said, faced with shifting geopolitics, digital transformations and the threat of a changing climate, there will be more challenges ahead which the ECB will need to address.’

Furthermore, the euro needed a ‘higher degree of integration’ in order to ‘cement its international status’, she said. The ECB was ‘counting on other policymakers to do their part. A monetary union is not an end point – it is a constant process of uniting. Each generation of leaders must continue it.’

The ECB had guaranteed stability for its member states, she said, citing ECB staff estimates saying that ‘had the euro not been introduced, the depreciation of some euro area countries’ currencies against the US dollar could have been up to 14% larger during the global financial crisis and up to 10% larger during the pandemic.’

The euro had ‘increased our sovereignty, allowing us to be the master of our own economic destiny and to set the monetary policy that Europe needs for stable prices and sustained growth’, she argued. Furthermore, public support for the euro had ‘been demonstrated at the ballot box whenever membership of the euro area has featured in national elections.’