European Central Bank (ECB) President Christine Lagarde has called on governments to maintain fiscal discipline, warning that rising debt and energy-related inflation risks could undermine economic stability. Speaking at the International Monetary Fund’s annual meetings in Thailand, Lagarde emphasized the need for sustainable public finances, urging governments to adhere to fiscal rules, reduce excessive debt, and improve spending efficiency to rebuild financial buffers.
Lagarde also stressed that measures addressing the ongoing energy shock should remain temporary and targeted to avoid long-term fiscal pressures. Her remarks came amid discussions among global finance ministers and central bankers about mounting public debt, geopolitical tensions, and the economic implications of artificial intelligence. Lagarde highlighted the importance of restoring an international economic framework based on openness, predictability, and established rules to support global trade and investment.
Turning to the eurozone, Lagarde reiterated the ECB’s view that economic growth faces downside risks, while inflation risks remain tilted upward. She acknowledged that the energy shock is significant but supported a measured monetary policy response. The ECB has already raised interest rates twice this year, in June and September, to contain inflationary pressures. Markets widely expect another rate hike before year-end, reflecting concerns that elevated energy costs could keep inflation above the ECB’s target.
ECB Governing Council member Olli Rehn echoed Lagarde’s concerns, stressing the importance of international cooperation amid increasing economic fragmentation. Meanwhile, Governing Council member Joachim Nagel suggested further monetary tightening might be necessary, while supporting the bank’s meeting-by-meeting approach. Lagarde also revealed that more than 30 central banks had expressed interest in the Eurosystem’s enhanced repurchase agreement facility, designed to support monetary policy transmission and strengthen the euro’s international role.