European Central Bank President Christine Lagarde has warned that inflation in the eurozone will keep accelerating until the end of 2026 before it starts to ease.
Speaking to German broadcaster ZDF on September 10, Lagarde said that according to the bank's current forecasts, inflation would continue to rise through the end of 2026, meaning the situation would get worse before it got better. She added that it would eventually get better.
Oil prices and the rate decision
Consumer prices across the eurozone have risen sharply following a spike in oil prices after the outbreak of war in Iran. Inflation reached 3.3% in August, well above the European Central Bank's 2.0% target.
In response, the central bank raised its deposit rate, a key rate for savers and banks, to 2.5% on Thursday. Following that decision, Lagarde said inflation was likely to remain significantly above the bank's target for an extended period.
Under the bank's latest projections, inflation is expected to average 3.0% this year. It is forecast to ease slightly to 2.5% in 2027 and 2.1% in 2028, still above the 2.0% target in both years.
Middle East tensions drive costs
Lagarde said events in the Middle East and their impact on the energy market were the single biggest factor pushing up what households pay for fuel and food.
She said the European Central Bank could not open the Strait of Hormuz, adding that the bank, however powerful, could not do that. She said it could not drill for oil or refine it, noting that the bank was only a central bank whose tools were interest rates, and that this was all it could do.
The Strait of Hormuz is a narrow waterway between Iran and Oman through which a large share of the world's seaborne oil exports passes, making it a frequent flashpoint for global energy prices during regional conflicts.
Ukraine's inflation also climbing
Inflation in Ukraine has also begun to accelerate, reaching 8.1% year-on-year in August.
The National Bank of Ukraine has warned that inflation will speed up further in the second half of 2026 and could reach 10% year-on-year by the end of the year. The central bank expects inflation to begin a steady decline from 2027, falling to 6.9%, before reaching its 5% target by the end of 2028.
Lagarde, who has led the European Central Bank since 2019, also used the ZDF interview to dismiss speculation about a possible early departure from her post, saying there was nothing to announce.
