European Central Bank President Christine Lagarde said the euro zone’s inflation shock requires action but does not yet show signs of dangerous second-round effects or unanchored price expectations. She told a European Parliament committee that the bloc is experiencing a not-too-persistent overshoot that requires some measured policy adjustment, adding that the shock is too large to look through without jeopardising the ECB’s 2% target. Lagarde noted no evidence yet of de-anchoring of inflation expectations or second-round effects that would warrant a more forceful response, and said the current shock appears smaller than the 2021/22 episode. She cautioned against complacency because wage formation may be more sensitive to new shocks, while pointing to resilient investment and strong household balance sheets as cushions. Lagarde also flagged that the Iran war is weighing on activity, with data pointing to a slowdown especially in services.