ECB’s Lagarde: Euro Zone Avoids 1970s-Style Stagflation Amid Inflation Risks
Lagarde Addresses Stagflation Concerns and Economic Outlook
By Yoruk Bahceli
Current Economic Situation in the Euro Zone
FRANKFURT, April 30 (Reuters) - The euro zone economy isn't facing stagflation even as growth and inflation risks intensify, European Central Bank chief Christine Lagarde said on Thursday.
Analysts have described the bloc's economy as facing stagflationary risks in recent days, with data pointing to surging prices and plunging economic growth. But Lagarde said the term didn't fit with current conditions.
Lagarde’s Comparison to the 1970s
"In the 70s, you had inflation continuing, continuing, continuing at a sort of sustainable and solid pace. You had very high unemployment. You had a monetary and fiscal framework that had nothing to do with what we have at the moment," Lagarde told journalists after the bank kept rates steady.
"So we don't apply stagflation, that flashy term, to the circumstances that we have."
ECB’s Assessment of Inflation and Growth Risks
The ECB on Thursday did say, however, that the upside risks to inflation - already far above its target - and the downside risks to the economy, which barely grew last quarter, have intensified.
Projections and Economic Growth Forecasts
Lagarde said the ECB's March projections, which foresaw the euro zone economy growing 0.9% this year followed by 1.3% next and 1.4% in 2028, did not point to stagnation.
"It's lower growth granted in '26, but we're not in stagnation, let alone recession," Lagarde said.
"Now you can imagine scenarios where we are heading towards those situations. But this is not what we are seeing for the moment."
Alternative Scenarios and Market Reactions
Earlier, Lagarde said the economy was moving away from March's baseline scenario.
In a separate, adverse scenario from March based on oil prices averaging nearly $120 this quarter -- a level they rose above on Thursday before falling -- and natural gas prices that are much higher than they are today, the ECB had projected the bloc would grow 0.6% this year followed by 1.2% next and 1.6% in 2028.
(Reporting by Yoruk Bahceli; Editing by Hugh Lawson)
