Christine Lagarde said the European Central Bank (ECB) kept key interest rates unchanged at its July policy meeting, while assessing inflation risks that remain tilted to the upside. She cited the potential for an energy shock to intensify and warned that, if energy prices stay elevated for longer, they are more likely to generate second-round effects.
Risks from Energy Shocks and Climate Events
She also pointed to the possibility that extreme weather events linked to the climate crisis could push up food prices.
Recent Market Developments and ECB Assessment
Since the June decision, the ECB has observed relatively benign developments, including a post-MOU fall in Brent crude that was faster than anticipated. The ECB’s assessment covered the density, durability and propagation of the supply shock.
