Finance
Euro Zone Inflation at Risk of Going Higher Than Forecast, Lagarde Says
Published by Global Banking & Finance Review®
Posted on April 17, 2026
2 min readLast updated: April 17, 2026
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ECB President Christine Lagarde warned that euro‑zone inflation may rise faster than projected due to heightened uncertainty from the Middle East war, with energy price shocks posing upside risks especially in the near term.
Iran war presents risk to euro zone growth and inflation outlook, Lagarde says
ECB's Assessment of Economic Risks Amid Iran Conflict
Impact of the Iran War on Euro Zone Growth and Inflation
WASHINGTON, April 17 (Reuters) - The Iran war could drag euro zone growth lower and push inflation above already increased projections, requiring the European Central Bank to remain vigilant, ECB President Christine Lagarde said on Friday.
ECB Policymakers' Debate on Interest Rates
ECB policymakers have been debating whether to raise interest rates to prevent the energy-driven inflation shock from setting off an inflation spiral, but signals suggest action is not seen as urgent for now.
Lagarde's Statement at the IMF Committee
"The war in the Middle East has made the outlook significantly more uncertain, creating upside risks for inflation and downside risks for economic growth," Lagarde told the IMF's International Monetary and Financial Committee.
"It will have a material impact on near-term inflation through higher energy prices," Lagarde said in comments that largely mirror her statement after the central bank's policy meeting last month.
Market Reactions and Broader Economic Challenges
Interest Rate Expectations
Markets have mostly priced out an interest rate hike in April but still see a move around mid-year, while a second hike at the end of the year is almost fully priced in.
Additional Geopolitical and Economic Pressures
Lagarde added that growth is also facing a drag from tighter global financial conditions, trade frictions and other geopolitical tensions, including Russia's war in Ukraine.
ECB's Policy Approach and Monitoring
Policy Decision Framework
However, she sent no fresh signals about policy, repeating her mantra that decisions are taken on a meeting-by-meeting basis and are based on incoming data, and the ECB was not pre-committing to any particular policy path.
Ongoing Monitoring and Assessment
"We are closely monitoring the situation, and the incoming information in the period ahead will help us assess the impact of the war on the inflation outlook," Lagarde said.
(Reporting by Balazs Koranyi; Editing by Paul Simao)
Key Takeaways
- •The Middle East conflict is injecting exceptional uncertainty into inflation forecasts, raising the likelihood of higher energy‑driven inflation than currently expected, especially near term.
- •ECB staff projections now include adverse scenarios showing headline inflation potentially reaching 3.5 % or even 4.4 % in 2026 if energy disruptions worsen.
- •The downturn in growth—from lowered GDP expectations to stagflation risks—complicates policy, as rising inflation coincides with weaker economic momentum.
Frequently Asked Questions about Euro zone inflation at risk of going higher than forecast, Lagarde says
1Why is euro zone inflation at risk of rising faster than projected?
According to ECB President Christine Lagarde, the outbreak of the war in the Middle East has increased uncertainty and tilted risks for euro area inflation to the upside.
2What factors are contributing to increased inflation uncertainty in the euro zone?
Exceptional uncertainty caused by geopolitical events, notably the Middle East conflict, is raising risks and complicating inflation forecasts.
3What did Christine Lagarde say about the medium-term inflation outlook?
Lagarde noted that medium-term inflation effects in the euro zone will depend on the intensity and duration of the war in the Middle East.
4Where did Lagarde make her comments about euro zone inflation?
She made the remarks at the IMF’s International Monetary and Financial Committee meeting in Washington.
