Statement from the International Monetary and Financial Committee

Christine Lagarde, President of the European Central Bank (ECB), delivered a statement at the forty-sixth meeting of the International Monetary and Financial Committee during the IMF Annual Meetings on October 14, 2022. Lagarde highlighted that global growth momentum has slowed due to high energy prices and geopolitical uncertainty. The war between Russia and Ukraine has led to higher energy prices and disrupted global food supply chains, causing inflationary pressures and concerns about food security. Although pandemic-related restrictions have eased, they may still impact global economic activity through supply-side disruptions. Inflation in the euro area remains high and is expected to stay above the ECB’s target for an extended period. The ECB will continue its monetary policy normalization path, raising interest rates based on a data-dependent approach. Lagarde emphasized the importance of fiscal policy in protecting vulnerable groups from the cost-of-living crisis while preserving debt sustainability and avoiding inflationary pressures. Euro area GDP growth is expected to significantly slow down in the second half of 2022 and early 2023, with downside risks primarily related to the war in Ukraine. Inflation has continued to rise, driven by energy and food price inflation, and is expected to remain above target in 2023 and 2024. The financial stability outlook has deteriorated due to weaker economic growth, higher inflation, and tighter financing conditions, posing risks to the debt servicing capacity of companies and households. The euro area banking sector has sound capital levels but faces uncertainties in future profitability and an increase in credit risk. Lagarde highlighted the need for further progress in global financial reforms, particularly in enhancing the resilience of the non-bank financial sector. She also emphasized international support for Ukraine and vulnerable countries, welcoming the approval of emergency financing and the new “food shock window” to address the current food crisis. Lagarde acknowledged the IMF’s work on climate change and the ECB’s action plan to incorporate climate change considerations into its monetary policy framework. The ECB is also supporting the G20 initiative to improve international payments and conducting an investigation into the potential design and distribution of a digital euro. International cooperation on digital currencies remains essential.

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