Lagarde highlights disinflationary impact of Middle East tensions easing but warns of persistent second-round effects on services and wages.
European Central Bank President Christine Lagarde welcomed the US-Iran peace deal as a potential source of inflation relief, citing reduced risks to energy prices from geopolitical tensions. The agreement could ease pressure on headline inflation, which had been driven higher by fears of Strait of Hormuz disruptions.
The ECB recently raised its deposit rate by 25 basis points to 2.25%, partly to counter inflation risks tied to energy costs. While the deal may lower immediate price pressures, Lagarde cautioned that second-round effects—such as wage growth and services inflation—remain a concern for policymakers.
Markets had priced in higher energy costs amid Middle East instability, but the diplomatic breakthrough could shift expectations. However, the ECB remains vigilant, signaling no immediate pivot in its policy stance despite the potential disinflationary tailwind.