In a statement to the International Monetary and Financial Committee, European Central Bank President Christine Lagarde set out the ECB’s assessment that the war in the Middle East has increased uncertainty for the euro area outlook, creating upside risks to near-term inflation via higher energy prices and downside risks to growth, and reaffirmed a data-dependent, meeting-by-meeting approach after the Governing Council kept key interest rates unchanged in March. The March ECB staff projections put real GDP growth at 0.9% in 2026 and headline inflation averaging 2.6%. The baseline projections foresee growth at 1.3% in 2027 and 1.4% in 2028, with headline inflation at 2.0% in 2027 and 2.1% in 2028, while core inflation is projected to ease from 2.3% in 2026 to 2.1% in 2028. Alternative scenarios assume energy supply disruptions persisting until the third quarter of 2026 (adverse) or late 2026 (severe), resulting in weaker growth and inflation above the baseline under both scenarios; headline inflation was reported at 2.6% in March (from 1.9% in February) and nominal wage growth at 3.7% in the fourth quarter of 2025. Lagarde also highlighted the February decision to enhance the Eurosystem repo facility for central banks (EUREP), introducing in-principle standing access for all central banks unless excluded on money laundering, terrorist financing or international sanctions grounds, and speeding up euro liquidity provision against high-quality euro-denominated collateral; she further pointed to the Eurosystem’s comprehensive payments strategy, including work on the digital euro and the Pontes and Appia projects to support tokenised central bank money in distributed-ledger-based wholesale markets. The updated EUREP framework is set to take effect in the third quarter of 2026. Lagarde indicated the ECB will continue to assess incoming information on the inflation outlook and monetary policy transmission, and called for swift adoption of the Regulation establishing the digital euro.
European Central Bank 2026-04-17
European Central Bank confirms expanded EUREP euro liquidity backstop from Q3 2026 and reiterates data-dependent rate stance
European Central Bank President Christine Lagarde told the International Monetary and Financial Committee that the war in the Middle East has increased uncertainty for the euro area, creating upside risks to near-term inflation via energy prices and downside risks to growth, and reaffirmed a data-dependent, meeting-by-meeting policy stance after key rates were left unchanged in March. March staff projections foresee real GDP growth of 0.9% in 2026 and 1.3%–1.4% in 2027–2028, with headline inflation at 2.6% in 2026 and around 2.0%–2.1% in 2027–2028. Lagarde also highlighted the enhanced Eurosystem repo facility for central banks, the Eurosystem’s work on the digital euro and tokenised central bank money, and urged swift adoption of the Regulation establishing the digital euro.