Lagarde Cools Market Expectations on Euro Zone Rate Hikes

ECB President Christine Lagarde downplayed market expectations of aggressive rate hikes to combat inflation in the euro zone. Speaking on Monday, she emphasized that moderate policy steps are still necessary due to the ongoing surge in prices.

Lagarde acknowledged that euro zone inflation has already surpassed 3% and may reach 4% by year's end, exceeding the bank's target of 2%. Despite this, she indicated that surging oil and gas prices, largely driven by US-Iran tensions, should not prompt a drastic response.

Lagarde's comments came as investors speculate about the need for up to four additional rate hikes next year on top of two moves over the summer. However, Lagarde cautioned against overly aggressive market bets, suggesting that inflation risks remain manageable.