Christine Lagarde, President of the European Central Bank (ECB), has stated that inflationary pressures are now feeding through to other parts of the economy. This development comes as the ECB last week raised interest rates for the first time since 2023 in response to high energy prices driven by the war in the Middle East.

Lagarde made these comments during an interview with France Culture, where she noted that indirect effects of inflation are being seen “more or less everywhere” in recent weeks. The ECB’s decision to hike interest rates has sparked concerns about its potential impact on economic growth. However, Lagarde emphasized that tackling inflation is a priority, as it can be more difficult and costly to bring under control once it becomes entrenched.

Lagarde acknowledged critics who argue that rate hikes will harm economic growth but insisted that this is a necessary step to prevent long-term inflationary pressures. “If inflation gets out of the bottle, getting it back in again will be much more difficult and costly,” she said. Her mission as ECB President is to ensure price stability, essential for both consumers and businesses.

Lagarde’s comments come at a time when there are hopes of a resolution to the conflict in the Middle East. The US and Iran announced an interim agreement to reopen the Strait of Hormuz on Monday, which Lagarde welcomed as “good news” if confirmed by subsequent events.

The ECB’s decision to raise interest rates is part of its efforts to manage inflationary pressures in the eurozone. With prices likely to remain elevated for some time, policymakers are keeping a close eye on developments and may consider further rate hikes at their July meeting. Lagarde’s comments suggest that the ECB is taking a proactive approach to addressing inflation but faces the challenge of balancing this goal with supporting economic growth.

Lagarde’s remarks also highlighted the potential impact of high energy prices on the wider economy, which could continue to drive up borrowing costs and fuel concerns about economic growth. The ECB chief’s emphasis on tackling inflation underscores her commitment to ensuring price stability in the eurozone.