Christine Lagarde, President of the European Central Bank (ECB), diagnosed that the global economy is facing pressures similar to those during the Great Depression of the 1920s.
According to major foreign media on the 20th (local time), Lagarde made this assessment during a speech at the International Monetary Fund (IMF) headquarters in Washington DC, stating, "There are several noticeable similarities between the 1920s and the 2020s."
In particular, President Lagarde compared the two eras in terms of the weakening of global free trade and technological advancements. She warned that the current global economy is facing a 'fracture' comparable to the pressures of the 1920s, which led to economic nationalism, the collapse of global trade, and the Great Depression.
However, Lagarde pointed out that modern central banks have the tools to manage structural changes. In the 1920s, monetary policy adhering to the gold standard resulted in major economies falling into deflation and financial crises.
On the other hand, Lagarde emphasized, "Today, we are in a better position than our predecessors to address these structural changes."
Furthermore, she evaluated the monetary policy responses of countries after the COVID-19 pandemic, noting that inflation eased rapidly after central banks began raising interest rates in 2022.
She stated, "It is very rare for central banks to raise interest rates in response to high energy prices without severe employment deterioration, but since the end of 2022, employment in the Eurozone has increased by 2.8 million."
She then assessed that it was remarkable that central banks were able to control inflation within two years while avoiding an increase in unemployment.
However, Lagarde emphasized the need for vigilance, warning that issues such as the potential retreat of globalization and the partial dismantling of global supply chains could put central banks to the test.
She urged monetary policymakers, saying uncertainty "will remain high" and "we must manage it better."
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