ECB Says Eurozone Economy Weakened by Iran-Linked Energy Shock

(MENAFN) According to reports, European Central Bank President Christine Lagarde said Tuesday that rising energy prices linked to the war involving Iran have pushed the euro area economy below the central bank’s baseline projections, though not enough to signal a shift toward tighter monetary policy.

Speaking in an interview with Bloomberg Television in Washington, DC during the IMF Spring Meetings, Lagarde said the eurozone is currently positioned between baseline and more negative economic scenarios.

“We are in between the baseline and the adverse” scenarios, she said.

She clarified that the revised outlook does not indicate a move toward higher interest rates.

“We have a compass which indicates price stability predicated on financial stability,” she said.

According to reports, the ECB is evaluating its policy response after weeks of conflict in the Middle East drove energy prices higher and dampened economic sentiment across Europe.

Inflation in the euro area has already exceeded the ECB’s 2% target, raising uncertainty about the persistence of the shock.

Lagarde emphasized that policymakers must remain flexible and rely on incoming data, noting that current conditions do not yet clearly point toward either tightening or easing monetary policy.

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