Christine Lagarde: Monetary policy in a new environment

Speech by Ms Christine Lagarde, President of the European Central Bank, at the European Banking Congress, Frankfurt am Main, 18 November 2022.

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

It is a pleasure to speak to you this morning.

When the former British Prime Minister Harold Macmillan was asked what the greatest challenge was for a statesman, he is said to have replied: "Events, dear boy, events". And indeed, as policymakers, we are constantly faced by unpredictable events and shocks.

But what makes the situation we face today especially challenging is that we are not only facing a sequence of ill-fated events – the pandemic, the energy crisis, Russia's unjustifiable invasion of Ukraine and high inflation – but that as a result, the environment around us is also changing.

Some of the major trends that characterised the past few decades are shifting or even reversing. In particular, we can no longer assume, at least in the near future, that global supply will gradually expand or that global demand will act as a shock absorber.

And this has implications for the focus of macroeconomic policy in the years to come.