BRUSSELS, March 19 (Reuters) – Any euro zone fiscal response to the surge in energy prices caused by the U.S.-Israeli war on Iran should be temporary, tailored and targeted, European Central Bank President Christine Lagarde told EU leaders on Thursday.
Lagarde spoke after the ECB kept its key interest rate at 2% on Thursday but policymakers expect to discuss hikes in the coming months as the Iran war pushes up inflation in the 21 countries sharing the euro currency.
Oil and gas prices have jumped since U.S.-Israeli attacks on Iran began, raising the risk that higher energy costs will drive up consumer prices and depress economic activity across the euro zone, which relies heavily on imported fuel.
“The ECB is well-positioned and well-equipped to navigate the unfolding shock, with inflation at around target, longer-term inflation expectations well anchored, and a resilient economy,” Lagarde told the leaders according to officials familiar with the discussions.
“Any fiscal response to the energy price shock should be temporary, targeted, and tailored. Completing the Savings and Investment Union would unlock the private capital needed to fund Europe’s energy transition,” Lagarde said.
Euro zone governments have not announced any plans for a fiscal response to the energy price surge so far.
(Reporting by Jan Strupczewski)
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