European Central Bank (ECB) President Christine Lagarde said on Oct. 17 that the energy shock is too large to "look through". A measured response remains appropriate to keep inflation in check. She made the remarks in a statement to the 54th meeting of the International Monetary and Financial Committee. That meeting took place at the International Monetary Fund (IMF) Annual Meetings. The statement also calls the euro area economy resilient so far, despite the ongoing energy shock. It also sets out a timetable for the digital euro.
Key facts, per the ECB statement
- Headline inflation: 3.8% in September, mostly from a surge in energy inflation.
- Core inflation: Increased slightly to 2.5% in September.
- Growth projections: September ECB staff projections: 0.9% in 2026, 1.4% in 2027, 1.5% in 2028.
- Inflation outlook: Expected to decline after the first quarter and return to around target towards the end of 2027.
Inflation: energy mostly drove the September rise
Lagarde said headline inflation increased to 3.8% in September. The rise mostly reflects a surge in energy inflation. Food and services inflation also rose, but to a lesser extent. Core inflation increased slightly to 2.5%. The ECB expects headline inflation to decline after the first quarter as energy inflation falls. It projects a return to around target towards the end of 2027. That path is a projection, not a result.
Growth: the ECB's projections for 2026 to 2028
Lagarde cited the September ECB staff projections. They foresee euro area growth of 0.9% in 2026. They give 1.4% for 2027 and 1.5% for 2028. Each figure is a projection for that year. The 0.9% is therefore not a reading of current growth. The projections come from ECB staff. The wider message is that the economy has held up so far despite the energy shock.
Financial stability: where the ECB sees risk
Lagarde said sources of risk and vulnerabilities for euro area financial stability remain high. Stress in private credit markets has continued. Private credit funds are reporting outflows and reactivating redemption gates. Euro area financial institutions have limited direct exposure to private credit. Artificial intelligence (AI) adds a second concern. Shocks could expose weak points among non-bank financial intermediaries, especially from concentrated AI-related exposures. That could amplify market stress and spill over across financial sectors. This is a conditional risk.
Digital euro and tokenisation: the dated steps
Lagarde also set out the timetable for the digital euro. The Eurosystem will run a 12-month internal pilot of the digital euro in the second half of 2027. One step is key to making the pilot possible. That step is adopting the Regulation on the establishment of the digital euro by the end of 2026.
Pontes is the Eurosystem's distributed ledger technology (DLT) settlement solution. It went live on Sept. 21. Pontes marks the first step in the ECB's strategy for a European tokenised ecosystem. The Appia initiative aims to deliver a blueprint for that ecosystem. The blueprint would rest on common standards, shared network infrastructure and European governance. Three of these items carry dates: Pontes, the Regulation and the pilot.
Digital euro and Pontes: what is done and what is not
Which of the ECB's dated steps are done, and which depend on later events?
- Sept. 21Pontes goes livedone
The Eurosystem's distributed ledger technology (DLT) settlement solution went live. It marks the first step in the ECB's strategy for a European tokenised ecosystem.
Source: European Central Bank, accessed Oct 17, 2026 - End of 2026Regulation adoption by end-2026uncertain
Lagarde calls adoption by the end of 2026 key to making the pilot possible. The statement does not give the Regulation's current status.
Source: European Central Bank, accessed Oct 17, 2026 - Second half of 202712-month internal pilotexpected
The Eurosystem will run a 12-month internal pilot of the digital euro to lay the groundwork for a launch.
Source: European Central Bank, accessed Oct 17, 2026
Dates are those given in Lagarde's statement. Regulation adoption is a stated requirement, not a confirmed schedule.
Analysis: a strong phrase with a restrained remedy
Headline inflation of 3.8% is well above core inflation of 2.5%. Core is the lower of the two readings. Lagarde ties the September rise mostly to energy. Her sentence pairs "too large to look through" with a measured response. It does not say how large a measured response would be. The words "so far" qualify the resilience claim. The same statement calls financial stability risks high.
What to watch
The next dated step the statement names is adoption of the digital euro Regulation by the end of 2026. The pilot in the second half of 2027 is tied to it. The growth figures and the inflation path are ECB projections and expectations. The full statement on the ECB site sets out the rest of its reasoning.
Sources: European Central Bank, accessed Oct 17, 2026
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