WASHINGTON, April 18 (Bernama-dpa) -- European Central Bank (ECB) President Christine Lagarde warned attendees at the International Monetary Fund (IMF) conference on Friday of inflationary risks stemming from the West As war, reported German news agency dpa.
Her comments came before US President Donald Trump and Iranian Foreign Minister Abbas Araghchi announced in separate statements that Iran has agreed to remove its blockade of the Strait of Hormuz, through Trump said the US naval blockade of Iranian ships would remain.
The news sparked a sharp drop in oil prices though it remains unclear where they will settle or how long the reopening of the strait will remain.
ECB President Lagarde's comments come shortly before the bank's next interest rate decision on April 30.
She said the war would have a significant short-term impact on inflation through higher energy prices, but the medium-term consequences would depend on the intensity and duration of the conflict.
"The war in the Middle East has made the outlook significantly more uncertain, creating upside risks for inflation and downside risks for economic growth," she said.
The ECB, which will again decide on key interest rates on April 30, was not committing in advance to a specific interest rate path, Lagarde said.
The oil price shock linked to the Iran war has pushed inflation in the eurozone significantly higher. In March, consumer prices rose 2.6 per cent year on year, statistics office Eurostat recently reported.
This means inflation in the currency area is as high as it has been since July 2024 and the ECB's inflation target is clearly exceeded in the short term. It is aiming for an inflation rate of 2 per cent in the medium term. In February, inflation had still stood at 1.9 per cent.
In financial markets, expectations have risen that the ECB will raise key interest rates over the course of the year. They most recently remained unchanged at 2 per cent.
Lagarde has made clear that the ECB would be ready to act if necessary.
--BERNAMA-dpa
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