Lagarde Reiterates Measured Approach to Euro Zone Inflation

ECB chief Christine Lagarde appeared before the European Parliament committee in Brussels on Monday to discuss the euro zone's inflation surge. According to Lagarde, the current rate of inflation is expected to reach double the bank's target by the end of the year, but she emphasized that there are no signs yet of 'second-round effects' or embedded inflation.

Lagarde pointed out that surging oil and gas prices, driven by the US-Iran conflict, are the main drivers of higher energy costs. She argued that while these high prices are causing a large shock to the economy, they do not appear to be feeding into higher wages.

The ECB chief acknowledged that risks are skewed towards higher inflation and warned against generous subsidies offered by governments to help consumers cope with rising energy costs. Such measures can prolong inflation in the long term and increase fiscal expenditure, Lagarde noted.