Lagarde says ECB must stay data-led amid energy shock

• Lagarde says the ECB’s priority remains price stability.
• She says the main threat is the energy crisis linked to the conflict in the Middle East.
• Lagarde says the ECB is not on the side of hawks or doves and is guided by facts.

ECB President Christine Lagarde said the main threat to the euro area is the energy crisis linked to the conflict in the Middle East. She said it is weighing on prices and growth, and repeated that price stability remains the ECB’s priority.

Lagarde says ECB must stay data-led amid energy shock

Energy and growth

Lagarde said the ECB cannot reopen the Strait of Hormuz or create new oil and gas reserves. She said the central bank’s task is to stop a supply shock from feeding through the economy durably and pushing up inflation.

She said this may lead the ECB to raise rates, even if that weighs on financing conditions and growth. The ECB raised rates in June and September.

Policy stance

Lagarde said she still rejects labels such as hawk or dove. She said she is guided by facts and will adjust when circumstances require it.

She said the ECB has tried to preserve consensus while taking extraordinary measures. She added that the institution did not always get it completely right, citing 2021, when it judged the energy shock would be temporary.

France and debt

Asked about France, Lagarde said she would not comment on any individual euro area country specifically. She said political uncertainty and budget deficits weigh on investment and activity.

She said the euro area is expected to grow by 0.9% this year, compared with 0.5% in France. She also said France’s debt, close to 120% of GDP, is not on course to be brought under control.

Lagarde said debt cancellation would be technically uncertain and financially very dangerous. She said it would risk higher borrowing costs and would violate the European Treaties.