ECB President Christine Lagarde addressed the European Parliament’s Economic and Monetary Affairs Committee, discussing inflation trends, economic growth, and the divergence between actual and perceived inflation.
Christine Lagarde, President of the European Central Bank (ECB), delivered a speech at the hearing of the Committee on Economic and Monetary Affairs of the European Parliament.
She highlighted that this week marks four years since Russia’s aggression against Ukraine, expressing solidarity with Ukraine and those affected by the conflict.
The euro area has faced high inflation and geopolitical challenges. Inflation peaked at 10.6% in October 2022 and has since declined to 1.7% in January 2026. The ECB’s monetary policy has been effective in reducing inflation, which remains above wage growth, leading to real wage increases.
The euro area economy grew by 0.3% in Q4 2025 and is projected to grow 1.5% in 2026. Domestic demand and services contributed to growth, while manufacturing was weaker. Future activity is supported by rising labor income and investments, despite challenging trade conditions.
Inflation perceptions tend to be higher than measured inflation, with perceptions exceeding actual inflation by 1.2 percentage points since April 2020. These perceptions influence economic behavior, expectations, and trust in institutions.
Factors affecting perceptions include personal experience, the frequency of purchases, psychology, media attention, and financial literacy. Food prices, which have been above overall inflation since mid-2022, significantly influence perceptions.
To align perceived and actual inflation, the ECB emphasizes maintaining inflation at 2%, improving communication, and investing in financial literacy. The ECB also uses accessible communication channels, such as YouTube explainers, to enhance understanding.
Lagarde concluded by emphasizing the importance of trust and cooperation between policymakers and the public to reinforce the legitimacy of the euro and the ECB’s mandate.
