"The current shock is longer-lasting," Lagarde told Ouest-France in an interview published on Saturday. She said continued conflict in the Middle East could keep energy markets volatile and prices elevated, even as higher costs threaten economic growth. Her comments came after the ECB raised interest rates this week for the second time since the war against Iran drove oil and gas prices sharply higher. The deposit rate now stands at 2.5%. Inflation in the euro area is currently above 3%, and policymakers expect further tightening may be needed to return price growth to the ECB's 2% target. Lagarde pointed to the Middle East conflict and the destruction of refining capacity, particularly in Russia, as factors driving energy costs higher.
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