ECB Warns of Longer-Lasting Inflation Shock Amid Middle East Conflict

European Central Bank President Christine Lagarde says that the current inflation shock will be longer-lasting due to ongoing conflicts in the Middle East and destruction of refining capacity.

Lagarde stated, 'The current shock is longer-lasting.' The conflict in the Middle East has led to increased energy prices, which is driving up all prices higher, according to Lagarde.

The ECB raised interest rates for the second time since the Iran war sent oil and gas prices soaring. Officials expect further rate hikes to bring inflation back to 2%, currently above 3%.

Bundesbank President Joachim Nagel said that the ECB may need to bring borrowing costs into mildly restrictive territory to control price growth, with the deposit rate standing at 2.5% after Thursday's move.