The ECB on Thursday became the first G7 central bank to raise rates as a result of the war in Iran.

The hike, a token 25bps, was widely telegraphed and fully priced by markets.

I won’t spend too much time recapitulating other than to remind readers that headline inflation in Europe rose to 3.2% in May courtesy of back-to-back double-digit increases on the energy gauge.

As I put it in this week’s macro preview, this “marks the second time this decade that someone else’s war of aggression triggered an energy supply shock to the detriment of price stability” across the common currency bloc.

On Thursday, the new staff projections reflected upward revisions to the outlook for headline inflation, which is now seen averaging 3% this year, while the growth projection for 2026 was adjusted lower. So, stagflation for Europe. What else is new?

“The war in the Mideast is generating inflation pressures, and the decision to raise rates is robust across a range of scenarios mapping out how the shock might evolve and affect the medium-term outlook,” the new statement said, adding that the “higher path for energy prices… is expected to feed into food, goods and services to some extent.”

During the press conference, Christine Lagarde wasn’t in the mood to entertain Trichet comparisons, nor to debate the best portrayal of Thursday’s move.

“I don’t need to characterize it as credibility insurance or whatever,” she said, calling the rationale for a June hike “pretty obvious.” “We have inflation that’s too high for our citizens,” she added.