By Ed Frankl

The European Central Bank's decision to raise its key interest rate this month was based on the bank's projections rather than a pre-emptive act to manage risks of inflation rising uncontrollably, President Christine Lagarde said Monday.

"Some have characterized our rate increase earlier this month as an 'insurance hike.' That is not an accurate description," Lagarde said at the opening of the ECB's central-banking forum in Sintra, Portugal.

"Our rate increase was justified under every scenario considered," she added. "Nothing we have observed since then has called this assessment into question."

The comments reinforced Lagarde's words at the ECB's policy meeting earlier in June, when the bank raised its key rate for the first time in almost three years, by a quarter-point, to 2.25%. Policymakers judged that the recent surge in energy prices due to the Iran war and its effects on inflation were too significant to ignore. Eurozone inflation has been above the ECB's 2% target since March.

The bank published fresh macroeconomic forecasts at that meeting, projecting headline and core inflation higher, with inflation only returning to target in the last quarter of 2027. Holding interest rates would have left inflation above 2% in 2028 too, Lagarde said.

However, energy prices, which were already easing throughout June, fell sharply after the agreement between the U.S. and Iran to end the fighting. In the last week, oil prices have returned to their prewar levels, furthering prior discussion among economists about whether the ECB tightened policy too fast.

"This was a decision based on what we saw in front of us. And our ability to take it with confidence, in an environment of considerable uncertainty, is the product of years of investment in our data, our indicators and our projections," Lagarde said.

The bank's forecasts had improved since a switch to more granular forecasts for oil, gas and electricity, Lagarde said, adding that projection errors since the outbreak of the war in the Middle East had been very small.

Some observers criticized the ECB for being too slow to act after the start of the inflation surge in 2022-23 that eventually brought interest rates to record highs.

The ECB president also said that the bank had become more resilient to shocks and that the tools like its Transmission Protection Instrument allow it to guard against unexpected spikes in borrowing costs in individual eurozone countries.

That resilience also means that the ECB can raise rates to address inflation without the concern that tightening itself becomes a source of financial stress, she noted.

"While we are more likely to face shocks that push inflation away from target, the resilience Europe has built means their effects on our economy are more contained. We may therefore more often find ourselves in an intermediate zone, between shocks we can look through and those we must react to forcefully," she added.

The bank also needn't make complex forward guidance, instead stressing its data-dependent, meeting-by-meeting approach. In times of uncertainty, forward guidance loses its value, Lagarde noted.

Write to Ed Frankl at edward.frankl@wsj.com