Christine Lagarde, the head of the European Central Bank, believes the global economy is in deep trouble, and about to hit a recession. She drew comparisons to the 1920s, when economic instability and bad decisions led to the Great Depression.

Profound shifts in the world economy could make inflation volatile for years to come, complicating efforts to control prices, but sticking with inflation-targeting regimes is still the best option, European Central Bank President Christine Lagarde said on Friday.

The European Central Bank must think hard about how it deals with risks and uncertainty in an era of more-volatile inflation and less clarity about monetary-policy transmission, President Christine Lagarde said.

The ECB lowered the rate on its main refinancing operations to 3.65% from 4.25%, while the rate on its marginal lending facility was dropped to 3.9% from 4.5%. That reduces the gap, or corridor, between the rate on main refinancing operations and the deposit rate to 15 basis points from 50 basis points.

PROFOUND shifts in the world economy could make inflation volatile for years to come, complicating efforts to control prices, but sticking with inflation-targeting regimes is still the best option, European Central Bank president Christine Lagarde said on Friday (Sep 20).

ECB President Christine Lagarde praised the "remarkable" unwinding of inflation with minimal job losses, projecting inflation to hit target by 2025. However, she warned that significant uncertainties remain.