Eurozone Inflation Set to Rise, but No Signs Yet of Becoming Entrenched, ECB's Lagarde Says

By Don Nico Forbes

Inflation in the eurozone is expected to rise further due to the energy crisis, but there is little evidence yet of higher energy costs feeding into broader price pressures in the economy, European Central Bank President Christine Lagarde said.

In her address to the European parliament on Monday, Lagarde said that despite rising price pressure, the central bank remains in its "middle path" for monetary policy, balancing the need to contain inflation against the risk of weighing too heavily on economic growth.

"This means that while the shock is too large to look through, we view a measured response as appropriate to keep inflation in check," she said.

In ECB staff projections from September, the central bank raised its inflation forecasts for 2027 and 2028 to 2.5% and 2.1%, largely due to higher energy prices stemming from the war in Iran.

"But we do not see evidence at this stage of energy prices feeding into higher wages," Lagarde said Monday.

"And while growth has been resilient, since our last meeting long-term interest rates have risen notably, which will slow growth and reduce pass-through by more than projected in our September exercise."

Lagarde added that while artificial intelligence is expected to be transformative in the coming years, its impact on the economy and inflation remains uncertain. The extent to which AI would complement or replace workers could have significant implications for incomes, demand and ultimately inflation, she said.

"AI has the potential to help firms produce more, and, over time, higher productivity could lower costs. All else equal, this should reduce inflationary pressures in the long term," Lagarde said.

Write to Don Nico Forbes at don.forbes@wsj.com

(END) Dow Jones Newswires

September 28, 2026 10:25 ET (14:25 GMT)