European Central Bank (ECB) President Christine Lagarde indicated on Wednesday, March 25, 2026, that the central bank could raise its key interest rates as early as April if inflation rises sharply due to the conflict in Iran. Lagarde emphasized that the governing council will carefully assess the situation before making any policy decisions regarding rate adjustments.
“We have a calibrated approach, and we are in a quality position to intervene if needed. Although, we will not act until we have sufficient clarity on the magnitude, duration, and impact of the shock,” Lagarde stated. The ECB’s cautious approach reflects the complex economic landscape and the need for precise data before implementing significant policy changes.
Lagarde also stressed that the ECB will not allow doubts to stall the decision-making process, reaffirming the institution’s commitment to maintaining an inflation rate of 2% in the medium term. This commitment underscores the ECB’s focus on price stability as a core objective.
“Monetary policy alone cannot lower energy prices – that is clear to everyone. But our task is to determine when higher energy costs spread to broader inflation, either through indirect effects or second-round effects, impacting wages and the pace of inflation,” Lagarde explained. This highlights the ECB’s concern about the potential for a wage-price spiral, where rising energy costs lead to higher wage demands, further fueling inflation.
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