"The current shock is longer-lasting," Lagarde told Ouest-France in an interview published on Saturday. She said continued conflict in the Middle East could keep energy markets volatile and prices elevated, even as higher costs threaten economic growth.
Her comments came after the ECB raised interest rates this week for the second time since the war against Iran drove oil and gas prices sharply higher. The deposit rate now stands at 2.5%.
Inflation in the euro area is currently above 3%, and policymakers expect further tightening may be needed to return price growth to the ECB's 2% target.
Lagarde pointed to the Middle East conflict and the destruction of refining capacity, particularly in Russia, as factors driving energy costs higher. She said the resilience of the euro-area economy meant policymakers had to respond to inflationary pressure.
New ECB projections released Thursday raised inflation forecasts for 2027 and 2028, with price growth in 2028 now expected to sit slightly above the central bank's target. Growth projections were also increased as the economy proved more resilient to the conflict and US trade policies.
Bundesbank President Joachim Nagel said Friday that borrowing costs may need to move into mildly restrictive territory to bring inflation under control.
Lagarde also addressed elevated valuations in the artificial intelligence sector, saying a market correction was possible. She cited risks linked to companies investing in one another and then awarding contracts for products such as semiconductors.
On France, Lagarde called for planned structural reforms to be implemented and repeated her opposition to proposals to cancel government debt held by central banks, describing such a move as financially dangerous.
She also played down the prospect of running in France's presidential election and reiterated that she plans to leave the ECB next year, without saying whether she will complete her term through October 2027.