ECB’s Lagarde says Eurozone inflation shock will last longer

Euro-area inflation is expected to persist for a longer period than initially anticipated due to ongoing conflicts in the Middle East, according to European Central Bank President Christine Lagarde. Speaking to Ouest-France, Lagarde stated that the current shock is more prolonged, as conflict in the region continues to pressure energy prices and keep markets volatile.

This development comes after the ECB raised interest rates for the second time since the Iran war initiated a surge in oil and gas prices. ECB's deposit rate is currently at 2.5%, and the central bank anticipates further tightening measures may be required to bring inflation back to its 2% target. Factors such as the destruction of refining capacity, particularly in Russia, and the resilience of the euro-area economy have led policymakers to respond to inflationary pressure.

Lagarde also warned that a market correction might be necessary in the AI sector due to elevated valuations and risks associated with companies investing in one another.