Euro-area inflation is likely to remain elevated for longer than previously expected as the Iran war, Middle East conflict and damage to refining capacity keep energy markets volatile, ECB President Christine Lagarde said. The ECB raised interest rates for a second time since the conflict drove oil and gas prices higher, taking its deposit rate to 2.5%. Inflation is currently above 3%, and policymakers expect further tightening may be needed to return price growth to the ECB’s 2% target. New projections raised the ECB’s inflation forecasts for 2027 and 2028, with 2028 inflation now expected to be slightly above target, while growth forecasts were also increased as the economy proved resilient to the conflict and U.S. trade policies. Lagarde said higher energy costs could weaken growth but that the ECB had to respond because the euro-area economy remained resilient. She also warned that highly valued artificial-intelligence companies face correction and circularity risks, defended structural reforms in France and rejected proposals to cancel government debt held by central banks as financially dangerous. Lagarde played down the prospect of running in France’s presidential election and said she plans to leave the ECB next year, without confirming whether she will complete her term through October 2027.