In a keynote speech delivered in Berlin on April 20, 2026, at the 75th anniversary reception of the Association of German Banks, Christine Lagarde, President of the European Central Bank, outlined the profound economic uncertainty caused by successive global shocks and the ongoing energy crisis.
She described a turbulent period marked by a pandemic, war in Europe, the worst energy crisis in 50 years, escalating trade tensions, and disruptions to global energy routes. According to Lagarde, these shocks have fundamentally challenged assumptions about energy security, global trade, and post-war stability in Europe.
Focusing on the current situation, she noted that the energy shock is among the largest oil supply disruptions in history, with significant losses in global supply. However, energy prices have so far not risen enough to push the euro area into the most severe economic scenario outlined by the ECB. Markets still appear to expect a relatively short-lived disruption, though the outlook remains highly uncertain.
Lagarde warned that a prolonged conflict could lead not only to higher inflation through energy prices but also to real economic shortages affecting key industries such as semiconductors, agriculture, and chemicals. She emphasized that the longer the disruption lasts, the more likely it is to shift from price pressures to actual rationing and production constraints.
On monetary policy, she highlighted two key uncertainties: the duration of the energy shock and the extent to which higher energy prices will feed into broader inflation. She noted that recent experience shows inflation dynamics depend heavily on economic conditions, such as demand strength and labour market tightness.
Lagarde also stressed the critical role of fiscal policy. She explained that while government support can protect households, poorly designed measures risk either weakening price signals or fuelling inflation further. She called for targeted, temporary, and well-designed support measures that protect vulnerable groups without undermining price stability or public finances.
Concluding her speech, Lagarde said Europe is facing one of its most decisive periods in decades, with repeated shocks reshaping the economic landscape. She reaffirmed the ECB’s commitment to its price stability mandate and its goal of bringing inflation back to 2% over the medium term, emphasizing that policy decisions will be guided by incoming data and careful assessment of evolving risks.
