ECB President Lagarde said inflation risks are tilted to the upside. An energy
shock could intensify and produce larger pass-through to wages and other prices
than currently expected; the longer energy prices stay elevated, the greater the
risk that indirect and second‑round effects lift headline inflation. Extreme
weather, including prolonged heatwaves and broader climate-related shocks, could
push food prices above expectations. Conversely, a sustainable resolution of the
Middle East conflict or weaker-than-expected indirect/second‑round effects would
reduce inflation risks.
