The European Central Bank is not ready to draw firm monetary policy conclusions as it continues to assess the economic effects of the ongoing war in Iran, according to ECB President Christine Lagarde.
Speaking in Berlin, Lagarde said that while energy prices have increased due to the conflict, the situation has not yet reached the level anticipated in the bank’s worst-case economic scenario. She stressed that policymakers need more information before deciding on any changes to interest rates.
The war has contributed to higher oil prices, but officials at the European Central Bank say there is still no clear evidence that these increases are feeding into broader inflation pressures, such as wage growth or sustained price rises.
Lagarde noted that uncertainty around how long the conflict will last and how its effects spread through the economy makes it difficult to act too quickly on monetary policy.
She added that while oil prices are above earlier forecasts, natural gas prices have remained lower than expected, partly due to shifts in global energy demand, including some buyers switching from gas to coal.
The ECB now faces mixed economic signals. On one hand, businesses and households in Europe still remember the high inflation period of 2022, which could lead to quicker wage and price adjustments. On the other hand, rising energy costs are reducing consumer purchasing power, which may limit companies’ ability to raise prices.
Lagarde also said there are currently only limited signs of major supply chain disruptions in the euro area or globally. However, she warned that some localized pressures are already visible.
She pointed out that jet fuel prices have risen sharply since the start of the conflict, with reports suggesting they have roughly doubled in some markets. In addition, some airports have introduced rationing measures due to supply constraints.
Despite these developments, Lagarde said the situation still does not justify immediate policy changes. The central bank is expected to wait for further economic data before making decisions at its upcoming meeting later this month.
Markets are now increasingly betting that any potential interest rate move is unlikely in the near term, as the ECB continues to take a cautious, data-driven approach.
For now, officials say they will closely monitor inflation trends, energy markets, and broader economic indicators before deciding how to respond to the evolving global situation.
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