Christine Lagarde: ECB to stay measured on war shock, calls for yuan valuation talks

European Central Bank President Christine Lagarde told EU lawmakers that the ECB does not see a need for a more forceful monetary response to the fallout from the Middle‑East conflict. Inflation is expected to return to the 2% target over the medium term, and there is no evidence yet of second‑round effects that would require tighter policy. The bank recently raised its key rate by 0.25 percentage points to 2.25 % – the first hike since 2023 – as energy prices and the war’s supply‑side shock lift headline inflation above 3 %.

Lagarde also used a G7 gathering in France to urge global leaders to discuss the alleged undervaluation of China’s renminbi. Citing IMF research, she said the currency appears 15‑16 % undervalued on an inflation‑adjusted basis and that the issue should be part of broader talks on macro‑economic imbalances, while dismissing calls for a new Plaza Accord.

In addition, she highlighted the need for a completed Capital Markets Union and the approval of a digital euro to strengthen the euro’s international role and reduce reliance on US payment systems. These measures aim to make the euro more competitive and resilient amid ongoing geopolitical and economic uncertainties.