Christine Lagarde's Speech on the Implications of Geopolitical Changes for Central Banks

Christine Lagarde , President of the European Central Bank , spoke at the Council on Foreign Relations’ C. Peter McColough Series on International Economics in New York on April 17, 2023. She spoke about the geopolitical shifts and how they may affect central banks. Lagarde suggested that the current period of instability could be giving way to a lasting instability resulting in lower growth, higher costs, and more uncertain trade partnerships. She also discussed how global value chains could fragment along geopolitical lines, which may increase the global level of consumer prices in the short and long run. Additionally, Lagarde noted that the world could become more multipolar as new trade patterns emerge, which could lead to new alliances and an opportunity for certain countries seeking to reduce their dependency on Western payment systems and currency frameworks.

Christine Lagarde also discussed the importance of central banks adapting to these changing circumstances by pursuing policies that foster stability and support sustainable economic growth. She emphasized the need for central banks to take a more active role in addressing climate change and promoting financial inclusion, as well as the importance of maintaining independence and credibility in the face of political pressures.

Lagarde also touched on the ongoing digitalization of finance and the potential implications for central banks, noting that while digital currencies offer some potential benefits, they also pose significant risks and challenges that need to be carefully considered.

Overall, Lagarde's speech highlighted the complex and rapidly changing global economic landscape and the need for central banks to be proactive in adapting to these challenges and promoting stability and growth.

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