Lagarde Maintains Moderate ECB Policy Response Amid Rising Inflation Fears

European Central Bank President Christine Lagarde has stated that moderate monetary policy remains an appropriate response to rising inflation in the euro zone. Despite euro zone inflation exceeding 3% and potentially reaching 4% by year-end, Lagarde believes there are no signs of 'dangerous second-round effects' from higher prices.

Lagarde attributed the surge in energy prices to the US-Iran conflict, dismissing concerns that these price increases will lead to higher wages. She emphasized that while inflation is expected to rise further, it remains transitory and does not indicate embedded inflationary pressures.

The ECB's moderate policy response has included two interest rate hikes during the summer, with market expectations suggesting up to four more rate hikes over the next year. Economists anticipate a third rate hike in December when new projections are released, skipping the scheduled October meeting.