Lagarde flags euro slump
ECB president Christine Lagarde said the euro‑zone economy has slipped below the bank’s baseline scenario and that the ECB has not decided whether rates need to rise because the economic fallout from the Iran war is still unclear. (reuters.com)
Christine Lagarde said on April 14 that the euro-zone economy has slipped below the European Central Bank’s baseline path, with the fallout from the Iran war still too unclear for a rate decision. (money.usnews.com) Lagarde said on Bloomberg Television that the economy now sits between the European Central Bank’s baseline and adverse scenarios, after the bank published war-related projections in March. She said policymakers would stay “agile” because the outlook is changing day by day. (marketwatch.com) At its March 19 meeting, the European Central Bank left its three key rates unchanged and said the Middle East war had made the outlook “significantly more uncertain,” with upside risks for inflation and downside risks for growth. The bank said the conflict would have a “material impact” on near-term inflation through higher energy prices. (ecb.europa.eu) The bank’s staff baseline from March projected euro-area growth of 0.9% in 2026, 1.3% in 2027 and 1.4% in 2028. It projected headline inflation at 2.6% in 2026, 2.0% in 2027 and 2.1% in 2028. (ecb.europa.eu) Inflation has already moved higher. Eurostat’s flash estimate put euro-area inflation at 2.5% in March, up from 1.9% in February, with energy prices rising 4.9% after falling 3.1% a month earlier. (ec.europa.eu) That leaves the European Central Bank balancing two pressures at once: weaker growth and a fresh energy shock. Lagarde said that mix has not yet pushed policymakers to conclude that rates need to rise again. (bloomberg.com) The current benchmark for policy is the deposit facility rate, which the bank uses to steer monetary policy. That rate has been 2.00% since June 11, 2025, after a series of cuts from 4.00% in September 2023. (ecb.europa.eu) The European Central Bank said in March that a prolonged disruption to oil and gas supplies would leave inflation above, and growth below, its baseline forecasts. Lagarde’s April 14 remarks suggest the economy has already moved part of the way in that direction, but not far enough for the bank to abandon its meeting-by-meeting stance. (ecb.europa.eu)
