In her opening statement, Lagarde expressed concern that the economy remained weak in the first quarter. She stated that production remains subdued, especially in energy-intensive industries, but she expects it to pick up in the coming quarters.
Lagarde also highlighted the need for governments to continue rolling back support and noted that tightness in the labor market is gradually declining. She pointed out that food and energy price inflation has been falling, while goods and services price inflation remained high in March at 4%. More recent indicators suggest further moderation in wage growth, with inflation expected to decline to target next year.
However, Lagarde also noted that risks to economic growth remain tilted to the downside. Growth could be higher if inflation comes down more than expected, but inflation could turn out higher if wages climb or profit margins remain elevated. Lagarde stated that if there is further confidence in the outlook, it would be appropriate to lower rates, but she clarified that there is no pre-commitment to a particular rate path.
