Lagarde signals higher input prices could feed through to consumers, reinforcing upside inflation risks amid Middle East tensions.
European Central Bank President Christine Lagarde said rising energy costs will lift input prices, potentially passing through to consumer inflation. The ECB held rates steady last week, with the deposit facility at 2.0%, as policymakers assess war-driven energy shocks.
The ECB’s March projections revised headline inflation upward to 2.6% in 2026, driven by higher energy prices linked to the Middle East conflict. Markets now price three rate hikes in 2026, with the first potentially in June, reflecting a more hawkish shift.
The central bank maintains a data-dependent approach, with no pre-set rate path, focusing on inflation dynamics and monetary policy transmission. Growth forecasts remain subdued amid heightened uncertainty.