Lagarde warns that euro area economy “continues fragile”

“ Aprospects remain uncertain, with risks of rising inflation and risks of slowing down economic growth. The Middle East peace agreement is welcome, but the situation remains fragile, there are risks of setbacks or a new escalation,” said Christine Lagarde.

In response to MEPs from the European Parliament's Committee on Economic and Monetary Affairs in Brussels, she pointed out that "the full implications of the war for inflation and growth in the medium term will depend on the intensity and duration of the shock in energy prices and on the extent of its indirect and second-order effects".

Two weeks after the ECB decided to increase interest rates, Christine Lagarde argued that such deliberation “is sound in all scenarios prepared by experts”.

This “means that, in all of them [scenarios analysed], an increase in fees is justified”, added the President of the ECB, stating that with this decision the central bank is “well positioned to face the uncertainty caused by war”.

“ We will follow developments closely and follow a data-dependent approach and take the meeting to determine the appropriate direction of monetary policy,” he said.

On 14 June, a preliminary understanding was announced between the United States and Iran to put an end to hostilities in the Middle East and open negotiations on the Iranian nuclear programme, lifting sanctions and regional security.

The agreement provides for a period of technical negotiations prior to their final formalisation and officialisation is conditional on compliance with the commitments agreed by both parties.

Before, on 11 June last, the ECB decided to raise interest rates by 25 basis points to 2.25%, in the one that was the first increase in principal rates in almost three years since September 2023.