Energy crisis means 'case for action' has grown, says ECB's Lagarde

25th Mar 2026 13:27

(Sharecast News) - The head of the European Central Bank has said that the "case for action" has grown to deal with the inflationary energy shock emanating from the US-Iran war.

Speaking at a conference at Frankfurt's Goethe University, Christine Lagarde acknowledged that policymakers are operating in "a different world" than just a few weeks ago, "facing profound uncertainty about the path of the economy".

"None of us can resolve the uncertainty about how the war in Iran will play out. But what I can do is set out how we will approach this shock," Lagarde said.

"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."

The ECB president said that large, sustained deviations from the central bank's inflation target will require "forceful monetary policy action, shifting to persistence as the tightening cycle matures, to prevent those deviations from becoming entrenched".

However, Lagarde stressed that it is premature to predict how far inflation will deviate from the target, and that the ECB will continue to assess the situation carefully.

"We will not act before we have sufficient information on the size and persistence of the shock and its propagation. But we will not be paralysed by hesitation: our commitment to delivering 2% inflation over the medium term is unconditional," she said.