Lagarde: Rising energy prices will not automatically trigger a rate hike; the ECB will make decisions based on a comprehensive assessment of inflation and growth.

European Central Bank President Christine Lagarde told eurozone finance ministers that a jump in energy prices will not automatically monetary tightening. "Interest rates will not move in lockstep with energy prices," Lagarde said Friday in Dublin. "Because obviously, energy prices and their impact on prices also act on other factors, especially CKH HOLDINGS consumption. We will take all of these elements into account, and the synchronized linkage mechanism is not the mechanism that actually applies." Lagarde made the remarks after eurozone finance ministers held an informal meeting in the Irish capital. Ireland will take over the rotating presidency of the European Union in the second half of 2026. Lagarde's comments came against the backdrop of ongoing geopolitical conflict in the Middle East disrupting global energy markets. Since the outbreak of the U.S.-Israel-Iran war, the Strait of Hormuz, which controls about 20% of global oil and gas transportation, has been nearly closed, driving energy prices sharply higher. Facing inflationary pressure, the ECB implemented its first rate hike in nearly three years in June, raising the deposit facility rate from 2.00% to 2.25%; in September it raised rates again by 25 basis points to 2.5%. The ECB expects inflation of 3% in 2026, 2.5% in 2027 and 2.1% in 2028, all above its 2% target. With recent increases in oil and gas prices expected to push inflation to about 4%, market pricing indicates at least three more 25-basis-point rate hikes over the next year. Some officials have hinted at readiness to tighten policy further, but have kept silent on the specific number of hikes. The ECB's forecasts released last week showed consumer price increases of 3% this year and 2.5% next year, far above the 2% target. At the same time, the region's economy has shown stronger-than-expected resilience to the Middle East war and the resulting energy shock. Lagarde said after the September policy meeting that the economy's resilience could persist into the third quarter, and economic growth in 2026 may exceed the 0.9% forecast. "We are taking a prudent approach to the current situation and have prepared scenario analyses to assess the possible consequences of certain variables," Lagarde said. "We are in a good position to respond based on more data, information and numbers, so as to make a good assessment of changes."