European Central Bank President Christine Lagarde stated that rising energy costs have shifted the eurozone economy away from the central bank's baseline scenario but are not yet sufficient to justify a bias toward interest rate hikes.

Regarding the impact of the Iran conflict, Lagarde said in an interview on Tuesday during the International Monetary Fund's spring meetings in Washington, "We are currently between the baseline and adverse scenarios." When asked if this implies a leaning toward monetary policy tightening by the ECB, she indicated that it does not.

The ECB is assessing necessary actions after the conflict, which has lasted over six weeks, drove a surge in oil prices and dampened economic confidence. Overall inflation in the eurozone has jumped above the 2% target level. A key question is how long this upward trend will persist.

While market consensus suggests that an interest rate increase is only a matter of time, expectations do not point to a rate hike at the ECB's next meeting on April 29-30, given the uncertain prospects for US-Iran peace talks.

Lagarde emphasized, "We must remain fully flexible and prepared to act in the required direction. We need to be data-dependent, as we have repeatedly stated, but this does not mean we are currently inclined to move in a particular direction. Nor does it determine the future path of interest rates."

The latest forecasts released by the IMF earlier on Tuesday may offer some guidance, projecting a faster rise in global inflation alongside weaker economic growth. The report anticipates eurozone consumer prices to increase by 2.6% this year, aligning with the ECB's own forecast.

However, as the conflict continues and the Strait of Hormuz remains closed, several ECB officials believe the likelihood of the baseline scenario materializing has diminished.

This brings the adverse scenario closer, which projects an inflation peak of 4.2%. Should the situation deteriorate further, a severe scenario includes a brief recession and inflation exceeding 6%.

Officials are monitoring the extent to which higher energy costs will transmit to other sectors of the economy.

Lagarde added, "We have been very clear that we need to act based on data, but we will not hesitate to take action. This reflects our position well. We require data to judge whether this is merely a short-term shock that will fade quickly, allowing a return to previous conditions—though I believe that is actually unlikely."