Lagarde’s message leans hawkish at the margin. A central bank that will act on early hints, without waiting for clear evidence of second-round effects, could move sooner than markets expect if wage settlements firm. That supports front-end European yields and the euro on a relative basis. Energy is the key transmission channel. With inflation driven mainly by energy prices, a further jump in oil or gas from Gulf escalation would raise the odds of pre-emptive tightening, making crude and TTF gas direct inputs into ECB pricing. Her comments on France offer no backstop signal, so the French-German yield spread remains exposed to Paris’s budget politics.-Lagarde sees no wage-price spiral yet, but she has made clear the ECB will act on the first signs rather than wait for proof.Summary:ECB President Christine Lagarde said inflation has been rising predominantly, but not exclusively, because of energy pricesShe said there are no second-round effects yet, but the ECB cannot wait until they are in full view and will look for early hintsThe ECB is monitoring wage expectations embedded in collective bargaining agreements as an early warning signAsked about French debt, Lagarde said the primary solution lies in French fiscal policyShe described euro area growth of 1.1% in 2026 as not brilliant but not bad, and said she will not run for French presidentEuropean Central Bank President Christine Lagarde said the euro area has yet to see second-round effects from higher energy prices, but signalled the central bank would not wait for them to become fully visible before responding.Lagarde said inflation has been rising predominantly, though not exclusively, as a result of energy prices. While there is no sign yet of those increases feeding through into broader wages and prices, she said policymakers must anticipate and look for early hints. The ECB is paying particular attention to collective bargaining arrangements, where expectations of future wage increases tend to show up first.Second-round effects occur when an initial price shock, such as a jump in energy costs, prompts workers to seek higher wages and companies to raise prices further, turning a temporary spike into more persistent inflation. Lagarde’s emphasis on acting before those effects are fully evident suggests a readiness to respond pre-emptively if wage settlements begin to firm.On the economy, Lagarde said growth is not brilliant, but that euro area growth of 1.1% in 2026 is not bad.Asked about France’s debt, she said the primary and first solution lies in French fiscal policy. The remark puts the onus on Paris rather than the ECB as French borrowing costs face pressure. Goldman Sachs noted in a recent client discussion that the spread between French and German government bond yields has widened sharply amid political tensions over the French budget, an issue it expects to persist ahead of the French presidential election in the first half of next year.Lagarde, who is French, also said she will not run for president of France.Her comments leave energy prices and wage negotiations as the key indicators for the ECB’s next steps. A renewed rise in energy costs, or early evidence of stronger pay demands, would increase pressure on policymakers to act before inflation becomes entrenched. This article was written by Eamonn Sheridan at investinglive.com.