Lagarde's comments reinforce the case for continued euro-area rate sensitivity, coming days after the ECB's second hike since the Iran war began pushing energy prices higher. With the deposit rate now at 2.5% and Bundesbank chief Joachim Nagel flagging the possibility of moving into mildly restrictive territory, markets are likely to keep pricing in a live risk of further tightening rather than an imminent pause. The euro could find some support on the hawkish framing, though the growth risk Lagarde herself acknowledged, alongside upgraded ECB growth forecasts, complicates a simple read on rate expectations.
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