Christine Lagarde: Price stability and policy transmission in the euro area

Speech by Ms Christine Lagarde, President of the European Central Bank, at the ECB Forum on Central Banking 2022 on "Challenges for monetary policy in a rapidly changing world", Sintra, 28 June 2022. 

The views expressed in this speech are those of the speaker and not the view of the BIS.

Inflation in the euro area is undesirably high and it is projected to stay that way for some time to come. This is a great challenge for our monetary policy.

In response to the changing inflation outlook, we have consistently followed the path of policy normalisation since December last year, sequentially adjusting our policy stance.

Net asset purchases under our various programmes will come to an end this week. In July we intend to raise our policy rates for the first time in 11 years. And we have provided some guidance for our September policy meeting and the rate path we envisage taking thereafter.

We will continue along this normalisation path – and we will go as far as necessary to ensure that inflation stabilises at our 2% target over the medium term.

As Victor Hugo is said to have remarked, perseverance is the "secret of all triumphs".

At the same time, the euro area differs from some other major economies for two key reasons and the path of normalisation has to be managed accordingly.

First, inflation in the euro area today is being driven by a complex mix of factors that reflect, in part, our economic structures and strategic dependencies. This creates uncertainty about how quickly inflation will return to our medium-term target.