FRANKFURT, (Reuters) – The Euro zone’s inflation rose to a new record last month. This intensifies a dilemma for the European Central Bank. It must maintain a calm environment amid market turmoil caused by war, but it also needs to respond to rising price pressures.

The inflation rate in 19 euro-zone countries accelerated to 5.8% in February from 5.1% in January. This beat expectations of 5.4%, and confounded the ECB’s projection that it would drop. Data from Eurostat was released Wednesday.

Inflation was driven by a 32% increase in energy prices last month. However, unprocessed food prices rose sharply as well. They increased 6.1% which made inflation particularly painful for families with lower incomes.

As energy costs continue to rise because of Russia’s war with Ukraine, experts predict that inflation could accelerate more in the months ahead. This would mean an average annual increase in inflation of around 5% to 6% this year. That’s more than twice what the ECB wants to achieve at 2%.

Because price pressures have been increasing for many months, it seemed certain that the ECB would accelerate its departure from ultra-easy policies at its March 10 meeting.

These plans have been thrown into chaos by the conflict, making the future policy outlook unclear.

The problem is for the ECB that war, although it may boost prices higher than all predictions this year (and is expected to do so in 2017), is a negative factor for growth and inflation for the longer-term, a horizon more relevant for them.

The high energy prices affect household purchasing power and eat away at corporate margins, which can impact investment. These costs are likely to have an impact on the prices of other goods, especially food, because fertilizer production is one of the largest expenses.

In the meantime, financing conditions have tightened already, mostly due to declining share prices and a 25% fall in the euro area bank index since mid February.

Fabio Panetta is an outspoken member of the ECB Board and a policy dove who has already argued for halting any tightening.

Graphic: Oil prices- https://fingfx.thomsonreuters.com/gfx/mkt/gkplgalzzvb/oilprices.JPG

ECB hawks argue, however that inflation is already very high and wide-based. Therefore, extraordinary stimulative measures are not necessary and a neutral policy environment would be more appropriate.

Joachim Nagel of the Bundesbank stated on Wednesday that German inflation is likely to exceed a previously raised forecast. The ECB must therefore keep its attention on normalizing policies.

Inflation underlying is also rapidly rising, suggesting it’s not just volatile items pushing up prices.

From 2.4% the month before, inflation excluding food, energy, and prices rose to 2.9% in February. An even more narrow measure which includes alcohol and tobacco also increased to 2.7%, from 2.3%.

The Hawks argue that people feel the effects of inflation more and more, making it politically dangerous for the central bank to not act.

The market, who had priced in interest rate increases of 50 basis points this year weeks ago, is now seeing an increase of around 15 basis points. As investors reprice their policy outlook, German 10-year yields were in positive territory for February and remained at minus 0.4% on Wednesday.

On March 10, the ECB will meet again. The policy decision is still open to all and can be modified depending on developments in Ukraine.