Speech by Christine Lagarde, President of the ECB, at “The ECB and Its Watchers XXIII” conference

Frankfurt am Main, 22 March 2023

The euro area has been hit by an inflation shock, which is now working its way through the economy. While headline inflation is likely to decline steeply this year, driven by falling energy prices and easing supply bottlenecks, underlying inflation dynamics remain strong.

In such an environment, our ultimate goal is clear: we must – and we will – bring down inflation to our medium-term target in a timely manner.

But to achieve this goal we need a robust strategy, which takes into account the high levels of uncertainty we are facing today. As John Maynard Keynes once observed, “it would be foolish, in forming our expectations, to attach great weight to matters which are very uncertain”.

In current conditions, a robust strategy calls for a data-dependent approach to making policy and a clear reaction function so that the public understands the…