Mucahithan Avcioglu
25 March 2026•Update: 25 March 2026
ISTANBUL
European Central Bank (ECB) President Christine Lagarde said Wednesday that the bank remains unconditionally committed to its 2% medium-term inflation target as it assesses the impact of the energy shock triggered by the Middle East conflict.
Speaking at a conference titled The ECB and Its Watchers, in Frankfurt, Lagarde said policymakers would not rush into action before determining the scale, duration, and persistence of the shock while making clear that the ECB stood ready to respond if inflation risks broadened.
“The main message I want to convey is that our response will be rooted in our monetary policy strategy,” Lagarde said. She added: “Monetary policy cannot bring down energy prices. But we must identify when higher energy costs risk spilling over into broad-based inflation – be it through indirect effects or through second-round effects via wages and inflation expectations.”
Lagarde said the ECB’s approach rests on three principles: assessing the nature of the shock before acting, focusing on risks and alternative scenarios rather than only the baseline outlook, and keeping a graduated set of policy options depending on the intensity and duration of the shock and how it spreads through the economy.
“Small, one-off and short-lived supply shocks can be looked through. But as expected deviations from our inflation target grow larger and more persistent, the case for action becomes stronger,” she said.
She said the current shock remains more manageable than the 2021-2022 energy crisis, noting that gas prices rose to around €340 ($394.3) per megawatt hour in August 2022, compared with around €60 now, while the broader macroeconomic backdrop is also more benign.
At the same time, Lagarde warned that vigilance remains necessary. She said attacks on energy infrastructure, particularly the Ras Laffan facility in Qatar, had reduced the likelihood of a quick normalization, while lower oil reserves and tightening LNG supply suggested the full impact of lost supply had yet to be felt.
Lagarde also warned that firms and workers may react faster than they did during the last inflation surge. “An entire generation has now lived through its first episode of high inflation – and it may not be as slow to react a second time,” she said.
She added that the ECB would continue to follow a meeting-by-meeting, data-dependent approach and could adjust policy at any meeting if needed.
