European Central Bank President Christine Lagarde has dismissed fears of stagflation in the eurozone, despite a rise in inflation driven by escalating energy prices due to the Middle East conflict. In April 2026, headline inflation reached 3.0%, up from 2.6% in March, with energy costs increasing by 10.9% year-on-year. Lagarde's comments suggest confidence in the ECB's economic outlook, maintaining a GDP growth projection of 0.9% for the year. The market currently anticipates a 50+ basis points rate cut, but Lagarde's remarks indicate the ECB's potential resilience against such measures. Her stance may challenge the market's 100% expectation for a rate decrease, reflecting a possible shift in market sentiment. Further statements from ECB officials and upcoming economic data will be crucial in shaping future market expectations.