European Central Bank President Christine Lagarde stressed the importance of sound public finances when addressing budget ministers at the International Monetary and Financial Committee in Thailand. She argued that fiscal sustainability remains a crucial anchor for broader economic stability, urging governments to maintain sound fiscal policies, adhere to fiscal rules, and consolidate where debt is high. Lagarde emphasized that any fiscal response to the energy shock should be temporary, targeted and tailored.
Her remarks come amid intense debate at the IMF's annual meetings in Bangkok, where discussions focused on rising debt levels, the AI revolution, and complex geopolitics. Lagarde called for a return to an international economic order grounded in openness, predictability and the rule of law to help trade and investment flourish. Governing Council member Olli Rehn echoed the need for international cooperation and an open, rules-based trading system.
Turning to the euro zone, Lagarde reiterated that risks to the economic outlook are on the downside, while inflation risks point upward. She noted the energy shock is too large to look through but a measured response remains appropriate. The ECB has raised interest rates twice this year, in June and September, and is expected to deliver another hike by year-end. Governing Council member Joachim Nagel said the job is not done and more action may be needed.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing