“The level of uncertainty we are facing is exceptionally high,” she said at a conference organized by the Institute for Monetary and Financial Stability at Goethe University Frankfurt.
She said policymakers are facing new two-sided shocks, mainly linked to trade and defence as well as climate change, which can amplify or counteract the existing forces.
“Maintaining stability in a new era will be a formidable task,” said Lagarde.
“It will require an absolute commitment to our inflation target, the ability to parse which types of shocks will require a monetary reaction, and the agility to react appropriately,” the banker added.
Lagarde observed that central bankers need to show agility to adjust their stance and their tools to changing circumstances.
Moreover, they will need intellectual curiosity to challenge established principles and conventional wisdom, the banker noted.
At the March rate-setting meeting, the ECB had cut its key interest rates for the fifth policy session in a row.
The bank repeatedly said that it will not pre-commit to a particular rate path.
GNA