Lagarde Warns Eurozone Inflation Will Last Longer Than Expected

European Central Bank President Christine Lagarde says that the eurozone's inflation shock will last longer than expected due to ongoing conflicts in the Middle East. This, she notes, is keeping energy prices elevated despite higher costs threatening economic growth.

Lagarde emphasized that policymakers must respond to inflationary pressure, citing the resilience of the euro-area economy and new ECB projections released Thursday. These projections raise inflation forecasts for 2027 and 2028, with price growth in 2028 expected to slightly exceed the central bank's 2% target.

Lagarde also addressed elevated valuations in the artificial intelligence sector, stating that a market correction is possible due to risks linked to companies investing in each other and then awarding contracts for products such as semiconductors.