IMF

Inflation in Europe will be down to target next year, but much uncertainty in the economic outlook remains, President of the European Central Bank Christine Lagarde said Friday, (September 20) in Washington, D.C. 

“Inflation is projected to return to 2% in the second half of 25. And if you consider the size of the inflation shock that we suffered, which at its peak was 10.6% in October ’22 and which has not returned to the latest readings, 2.2% This unwinding is remarkable. But is the uncertainty gone? No. There is still plenty of that around,” noted Lagarde. 

She was in the US capital to deliver the annual Michel Camdessus lecture on the economy at the International Monetary Fund. The speech is named after a former Managing Director of the Fund and focused on lessons from the pandemic recovery to monetary policy. 

Lagarde noted that mistakes had been made in assessing the ‘stickiness’ of inflation in the wake of pandemic, but a dose of humility among forecasters was important in learning from them and adjusting for the future. 

“Well as a result of the combined impact and wanted us to deal with the shocks, that just didn’t happen. And that shock loss lasted much longer, left much deeper effects and sort of trickled down into the economy from direct effect, from direct effect and, this, sort of the food chain entirely was affected by that. But I think to have the ability and the humility to recognize that, okay, we got that wrong and we need to reassess and we need to reexamine what analytical tools we have, what models we use, how we believe we are prepared to be receptive to different indicators and instruments. I think that was helpful as well,” Lagarde told the audience of Fund staff, diplomats and policymakers. 

The IMF and the World Bank are celebrating their 80th anniversary of their founding in the final days of World War 2 when allies met in Bretton Woods, New Hampshire to form institutions to rebuild and stabilize the world economy. 

“Those of us who believe in democracy, in trade, in the international rule of law and all that, it’s a tough moment. And I think in the moment, as critical as this, it’s vital for the IMF continues to deliver what it was tasked to do under the changing circumstances that we are facing,” said the French national and former head of the IMF. 

A copy of the full transcript is available at IMF.org.