Lagarde Warns of Longer-Lasting Eurozone Inflation Shock

European Central Bank President Christine Lagarde has warned that eurozone inflation is likely to remain elevated for longer than expected due to higher energy prices linked to Middle East tensions.

The ECB raised its three key interest rates by 25 basis points this week, taking the deposit facility rate to 2.5%, in response to continued inflation pressures.

Lagarde attributed the high energy costs to the Middle East conflict and disruptions affecting refining capacity.

Despite these challenges, the ECB expects eurozone economic growth of 0.9% in 2026 and 1.4% in 2027, revised upwards from earlier projections of 0.8% and 1.2%, respectively.