ECB President Warns Middle East Conflict Could Drive Inflation and Slow Growth

European Central Bank (ECB) President Christine Lagarde warned on Monday (22/6) that the conflict in the Middle East has driven up energy prices, increased inflation, and burdened economic activity in the eurozone. Speaking at the European Parliament’s Committee on Economic and Monetary Affairs in Brussels, Lagarde said the outlook remains highly uncertain, with upside risks to inflation and downside risks to growth. She welcomed the peace agreement in the Middle East but cautioned that the situation remains fragile, with risks of setbacks or new escalations. The full implications of the war for medium-term inflation and growth will depend on the intensity and duration of the energy price shock, as well as the scale of indirect and second-round effects, she added. Eurozone inflation rose to 3.2 percent in May from 3.0 percent in April, driven mainly by higher energy inflation, which exceeded 10 percent in both April and May. Meanwhile, inflation excluding energy and food also edged up to 2.6 percent in May, partly reflecting early indirect effects from higher energy prices.