Lagarde Says Euro-Area Economy Resilient, Digital Euro Imminent
Key Takeaways
- •Christine Lagarde said September's 3.8% euro-area inflation largely reflected high energy costs that the ECB expects to ease next year.
- •The energy shock is projected to keep euro-area inflation above the ECB's 2% target through the first half of 2027, with a measured policy response still considered appropriate.
- •The ECB is preparing a digital euro to complement cash for day-to-day retail payments, with issuance contingent on the European Parliament and EU member states agreeing on final rules after the European Commission's June 2023 draft legislation.
- •The ECB has launched Pontes, a system allowing financial institutions to settle wholesale tokenized asset transactions in central bank money as an alternative to private settlement assets such as stablecoins.
- •Pontes will initially provide a core set of services, with full implementation expected by 2028.
European Central Bank President Christine Lagarde described the euro-area economy as resilient, saying September's 3.8% inflation rate largely reflected high energy costs that the central bank expects to ease next year.
Speaking at the International Monetary Fund's Annual Meetings on Saturday, Lagarde said the energy shock is expected to keep euro-area inflation above the ECB's target through the first half of 2027, but added that a measured policy response remains appropriate. The ECB has targeted a symmetric 2% inflation rate since concluding its strategy review in 2021, and Lagarde has led the institution since November 2019.
Digital Euro Preparation Advances
Lagarde said that, in parallel, the ECB is moving ahead with its work on a digital euro. She said:
“In the retail space we are preparing to complement cash with its digital equivalent — the digital euro — for day-to-day payments. The digital euro will further stimulate innovation and competition in retail payments, ensuring that the continued co-existence of public and private solutions underpins Europe's strategic autonomy in payments.”
The digital euro is the ECB's proposed retail central bank digital currency, intended for everyday payments alongside cash. The Eurosystem launched its investigation phase in 2021 and moved into a preparation phase in November 2023, with any issuance decision contingent on the EU legislative process. On that track, the European Commission put forward draft digital euro legislation in June 2023, and any issuance would require the European Parliament and EU member states to agree on the final rules.
Wholesale Settlement via Pontes
As Cointelegraph reported on Sept. 21, the ECB has launched Pontes, a system that allows financial institutions to settle wholesale tokenized asset transactions in central bank money, providing an alternative to private settlement assets such as stablecoins. Settlement in central bank money gives participants a direct claim on the central bank, unlike stablecoins, which are liabilities of private issuers.
The system initially offers a core set of services, with full implementation expected by 2028. Taken together, the retail and wholesale projects show the Eurosystem working on both fronts: a digital euro for day-to-day payments and central bank money settlement for tokenized markets.
Related: The ECB has said its digital euro app will exceed EU accessibility standards.
Source: CryptoNewsNet
