Lagarde Calls for Measured Response as Inflation Outlook Brightens

European Central Bank (ECB) President Christine Lagarde emphasized the need for a 'measured response' to manage inflation, which is expected to rise in the coming years. According to her, growth has been broad-based across most countries and sectors, with manufacturing performing solidly and the labor market remaining robust.

However, the outlook remains highly uncertain, and major tech advancements have not yet reduced unemployment. The ECB expects higher inflation ahead, particularly for 2027 and 2028, which was a surprise even to its own expectations.

Lagarde reaffirmed the ECB's commitment to its 'middle path' monetary policy approach, which it outlined earlier this year. This measured response aims to keep inflation in check while acknowledging that the current shock is too large to be ignored.