Lagarde Defends Moderate ECB Hikes Amid Euro Zone Inflation

European Central Bank (ECB) chief Christine Lagarde emphasized that moderate policy responses remain appropriate to control inflation in the euro zone. Speaking at a European Parliament committee hearing, she noted that this year's inflation has not yet generated 'dangerous second round effects.'

Lagarde pointed out that euro zone inflation has already surpassed 3% and may reach up to 4% by the end of the year, which is double the bank's target. However, she appeared to push back on market bets for additional rate hikes. The ECB chief argued that surging oil and gas prices, stemming from the US-Iran conflict, are driving higher prices.

Lagarde stated, 'We see higher inflation ahead but no signs yet that it is becoming embedded.' She also added, 'This means that while the shock is too large to look through, we view a measured response as appropriate to keep inflation in check.'