Christine Lagarde says "The full impact has not yet manifested" after Middle East energy shock

The European Central Bank held its key interest rate at 2.25 percent on July 23, 2026, pausing further moves amid an energy shock driven by escalating hostilities in the Middle East. ECB President Christine Lagarde stated during a press conference that the full inflationary consequences of that shock have yet to emerge, warning that higher energy costs may keep inflation well above the central bank’s 2 percent target into 2027. Lagarde noted that uncertainty remains exceptionally high, with oil prices above $90 a barrel after renewed conflict, and that second-round effects on goods and services could appear in coming months. The decision, which followed a brief period of optimism after a June ceasefire, signals that the ECB is waiting to assess the shock’s duration and indirect effects before adjusting policy again.