ECB ready to hike rates even if expected inflation surge is short-lived, Lagarde says

Core Viewpoint - The European Central Bank (ECB) is prepared to increase interest rates in response to a potential rise in euro zone inflation, even if this increase is expected to be temporary [1][2]. Group 1: Inflation Forecasts - ECB President Christine Lagarde indicated that a "not-too-persistent" rise in inflation could lead to a policy adjustment, as the bank has revised its inflation expectations to forecast a rise above the 2% target [2]. - Prior to the Iran conflict, the euro zone's inflation rate had fallen below the ECB's 2% target, but it increased to 1.9% in February [3]. Group 2: Impact of Global Events - The ongoing conflict in Iran and the blockade of the Strait of Hormuz have significantly increased global oil and gas prices, disrupting inflation forecasts in Europe [4]. - Lagarde emphasized the importance of addressing any overshoot in inflation to avoid communication risks, as the public may struggle to understand a lack of response from the ECB [3].