FRANKFURT, April 14 (Reuters) – The European Central Bank has not made its mind up on whether to raise interest rates as the fallout of the Iran war on the euro zone’s economy is still unclear, ECB President Christine Lagarde said on Bloomberg TV on Tuesday.
Investors have been speculating on ECB rate hikes as soon as this month as the closure of the Strait of Hormuz pushes up fuel prices in the energy-importing euro zone, threatening to trigger another surge in inflation.
But Lagarde said it was still too early to draw conclusions and appeared to rein in colleagues who have ventured predictions about possible rate increases.
“It doesn’t predicate that we’ll go in one direction or the other and it certainly does not determine a rate path that I can confirm today,” Lagarde said of the situation in Iran.
“Any of the colleagues who are confident that it’s going to be one way or the other don’t know, honestly.”
The ECB published baseline projections last month under which the hit from the Iran war would be short-lived.
But it added an adverse scenario that assumes a much sharper increase in energy prices, greater uncertainty and international spillover, and a severe one in which inflation rises to 4.8% next year.
Lagarde said the economy was “between the baseline and the adverse” scenario — comments that traders may take as suggesting a rate hike was not imminent.
Asked about the prospect of resigning early, Lagarde likened herself to a captain who won’t abandon the ship when there are clouds on the horizon.
“This captain is not going to leave the ship, because I see clouds,” she said.
(Reporting by Francesco Canepa; Editing by Alison Williams and Keith Weir )
