Lagarde: High energy prices are transmitting to all sectors of the economy and inflation must be curbed

(1) European Central Bank President Lagarde stated that high energy prices are starting to spread to other sectors of the economy, and the indirect impact of inflation has been felt in almost every sector in recent weeks. (2) The European Central Bank raised interest rates last week (for the first time since 2023) and does not rule out the possibility of another rate hike as early as July. Bundesbank President Nagel believes that even if the Middle East conflict ends soon, prices may remain elevated for a longer period. (3) In response to criticism, Lagarde said she understands concerns that rate hikes could stifle growth, but emphasized that once inflation starts to rise, it must be contained, as it becomes more difficult to manage once it gets out of control. Prolonged high inflation is unsustainable for both consumers and businesses. Prior to these remarks, the US and Iran had just announced a provisional agreement to reopen the Strait of Hormuz.