Berlin: European Central Bank (ECB) President Christine Lagarde warned Thursday that the war in the Middle East and recent developments in Russia's war against Ukraine would keep headline inflation well above the bank's 2% target for an extended period. Lagarde spoke to reporters in Berlin after the ECB Governing Council raised its three key interest rates by 25 basis points.

According to Anadolu Agency, Lagarde noted that short-term inflation expectations remained elevated, but said the ECB continued to foresee stabilization in the medium term. She stressed that the bank remained committed to setting monetary policy to ensure inflation stabilizes at its 2% target. The Governing Council adopted the rate decision unanimously, she said, adding that the outlook remained highly uncertain, with risks tilted upward for inflation and downward for growth.

Lagarde said the Governing Council did not discuss possible future moves and that looking too far ahead would have little value because economic conditions were changing rapidly. The ECB would remain focused on incoming data, with its next move impossible to predict, she added.

Lagarde acknowledged that the resilience of the eurozone economy and recent inflation figures had surprised the Governing Council. The ECB had anticipated stronger pressure from food prices, while headline inflation was now expected to remain elevated for longer than initially projected. The developments were incorporated into its updated forecasts.

Addressing rising global bond yields, Lagarde said changes in the balance between supply and demand were among the main drivers. Growing corporate funding needs and artificial intelligence investment were contributing to increased activity in global bond markets, while the size of the US market was also playing a role. 'At the ECB, we are monitoring developments in the bond market very closely, particularly with regard to long-term interest rates,' she said.

Lagarde also stressed the importance of the digital euro, saying digital central bank money had become necessary and would reduce Europe's dependence on non-eurozone actors. Responding to reports that she could step down before her term expires next fall, Lagarde said, 'If there were any developments regarding my personal future, they would be announced immediately. At this point, there is nothing to announce.'