ECB President Christine Lagarde urged governments to keep public finances sustainable, citing rising debt and energy-related inflation risks. She also said the ECB sees downside risks to eurozone growth and upside risks to inflation. Markets expect another rate increase before year-end.
European Central Bank President Christine Lagarde urged governments to maintain sustainable public finances, warning that rising debt and energy-related inflation risks threaten economic stability. She spoke at the International Monetary Fund's annual meetings in Thailand.
Lagarde calls for fiscal rules and temporary energy support
Lagarde described fiscal sustainability as a crucial foundation for broader economic stability. She called on governments to adhere to fiscal rules, reduce excessive debt and improve public spending efficiency to rebuild financial buffers.
She also asked policymakers to keep measures addressing the energy shock temporary and targeted, rather than creating additional long-term fiscal pressures. Her remarks followed discussions among global finance ministers and central bankers about mounting public debt, geopolitical tensions and the economic implications of artificial intelligence.
ECB sees growth risks down and inflation risks up
Turning to the eurozone, Lagarde reiterated the ECB's assessment that economic growth faces downside risks, while inflation risks remain tilted upward. She warned that the energy shock was too significant to disregard, although a measured monetary policy response remained appropriate.
The ECB has raised interest rates twice this year, in June and September. Markets widely expect another increase before year-end, reflecting concerns that elevated energy costs could keep inflation above the central bank's target.
Governing Council member Joachim Nagel suggested further tightening might be necessary, while supporting the bank's meeting-by-meeting approach. Fellow member Olli Rehn said monetary policy would continue prioritising price stability to support sustainable economic growth.
Lagarde also revealed that more than 30 central banks had expressed interest in the Eurosystem's enhanced repurchase agreement facility, which is designed to support monetary policy transmission and strengthen the euro's international role.
Source: Investing.com
Trading involves risk.
Risk Disclaimer
