Debate on the European Parliament Plenary Session Regarding the ECB’s Annual Report

Christine Lagarde, President of the European Central Bank (ECB), delivered a speech at the plenary session of the European Parliament, emphasizing the importance of the ECB’s independence in fulfilling its mandate of ensuring price stability in the euro area. Lagarde acknowledged the impact of high inflation on the economy and people’s lives, particularly on low-income households. She highlighted that the Governing Council of the ECB has started a process of policy normalization, raising interest rates by 300 basis points since July 2022, with the aim of returning inflation to the 2% medium-term target. Lagarde stressed the responsibility of central bankers to be accountable for their decisions and to explain their policies to the public. She also expressed the ECB’s commitment to listen to the concerns of the public and evaluate how to respond within its mandate. Lagarde provided an assessment of the euro area economy, noting that growth slowed in the fourth quarter of 2022, but confidence is rising. Inflation remains high, although there was a decrease in January due to a drop in energy prices. Lagarde mentioned that wages are growing faster, supported by robust employment dynamics. She highlighted the risks to the growth and inflation outlook, including Russia’s war against Ukraine. Lagarde discussed the ECB’s monetary policy decisions, stating that interest rates will be raised further, and the Eurosystem’s balance sheet will be reduced under the asset purchase programs. She also touched upon the expansion of the euro area and the importance of completing the Economic and Monetary Union. Lagarde called for progress in strengthening euro area financial integration, reforming the EU economic governance framework, and laying down an appropriate regulatory framework for the digital euro. She concluded by emphasizing the ECB’s commitment to its mandate and the need for central bank independence balanced with accountability. Lagarde expressed the ECB’s readiness to formalize accountability practices with the European Parliament and welcomed the opportunity to listen to the views of the parliamentarians during the debate.

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