ECB's Lagarde: Risks to the growth outlook are to the downside
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Some indicators of underlying inflation have been driven higher by energy shock Firms are getting ready to pass on higher input prices Households in solid financial position Consumption is a driver of growth The conflict is weighing on activity Domestic demand weaker than project
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The desk is positioning for a cautious outlook on the euro amid rising geopolitical tensions and inflationary pressures. Per the full note [source], Christine Lagarde highlighted that the ongoing conflict in the Middle East is exacerbating energy prices, which poses risks to both growth and inflation in the euro area. With the ECB projecting GDP growth at 0.9% for 2026, the desk anticipates that any fiscal measures will need to be temporary and targeted to mitigate these pressures. Upcoming inflation data in June will be critical in shaping market sentiment and ECB policy direction.