By Ed Frankl and Don Forbes
Risks to the eurozone's inflation and economic growth are more balanced after the decline in energy prices in the last month, European Central Bank President Christine Lagarde said Wednesday.
"Risks...that we had to the upside on inflation and to the downside of growth are probably more broadly balanced than they were a few weeks ago as a result of what we are seeing," she said on a panel at the ECB's forum in Sintra, Portugal.
Oil prices declined to $72 a barrel in June from $120 a barrel in March, Lagarde noted. Price changes occurred at such a pace that central bankers should become prepared to measure them using different tools such as artificial intelligence, she added.
Lagarde reiterated that the central bank raised its key rate at its meeting in June based on forecasts that said inflation would be above its 2% target until 2028 without a change in monetary policy.
"When you have your inflation outlook up, your core inflation up... you have the obvious decision," she added.
ECB policymakers at the conference in Sintra have been balancing their discomfort over above-target inflation and acknowledgment that falling oil prices have lessened concerns over sustained inflationary pressures.
The ECB's vice-president, Boris Vujcic, said the bank could wait until fresh macroeconomic forecasts are published in September before deciding its next move.
"We will have to wait for data to come in until the July meeting, and then in September we have new projections, and then we will decide, depending on further data that will come in," he said in an interview with CNBC.
Inflation in the eurozone fell in June by more than expected, data published Wednesday showed, driven not just by lower fuel costs, but by cooling services prices. That suggests the recent energy-price surge hasn't broadened out cost pressures significantly to other areas of the economy.
The inflation data likely settles the debate over whether the ECB will hold its key interest rate this month, economists say, but investors still expect at least one rate hike by the end of the year.
Lagarde was speaking on a panel alongside Bank of England Governor Andrew Bailey and Kevin Warsh, who made his first international appearance as Federal Reserve chair since replacing Jerome Powell in May. Both the BOE and Fed left interest rates unchanged last month.
When asked whether it was positive or negative that there was a difference between the banks' recent policy decisions, Lagarde said that they had started from distinct positions in terms of interest rates and inflation.
"I don't regard that as a divergence. I think the commitment is the same: to maintaining price stability," she said.
Write to Ed Frankl at edward.frankl@wsj.com and Don Forbes at don.forbes@wsj.com