FRANKFURT, (Reuters) – The European Central Bank increased its inflation projections Thursday. However, it reduced its growth outlook because of the war in Ukraine. This conflict is expected to increase commodity prices and reduce households’ buying power as well as firms’ investment ability.

Christine Lagarde (ECB President) stated at a press conference that the ECB sees inflation rising more than twice to its 2% target for this year. Price growth is expected to be higher next year.

This year’s inflation average is 5.1%. That is higher than the December prediction of 3.2%. In 2023 it will be 2.1%. It is also above the previous forecast of 1.8%.

Lagarde warns that the Russia-Ukraine conflict “will have an impact on economic activity, inflation through higher energy prices and commodity prices as well as disruption of international commerce. This will lead to weaker confidence.”

The extent of the effects depends on the outcome of the conflict, the effect of existing sanctions and any additional measures.

She said that the ECB Governing Council believes it is increasingly likely that inflation will stabilize at its 2% target in the medium-term.

The projections indicate that inflation will exceed the target by at least three more years in 2021. This is a reverse of the past decade when bank failed to revive anaemic prices growth.

The projections of the ECB over the last year have not been reliable and policymakers are questioning the accuracy of their models. They failed to correctly predict the rise in prices before Russia invaded Ukraine, which began Feb. 24, 2014.

But, high commodity prices can be a problem for growth. This will hold back an economy just recovering from a severe, pandemic-induced depression.

Here are the ECB’s inflation and quarterly growth projections up to 2024. These figures are past forecasts that were made in December.

The ECB wants inflation to be at 2%

2022 2023 2024

GDP growth 3.7% (4.2%) 2.8% (2.9%) 1.6% (1.6%).

Inflation 5.1% (3.2%) 2.1% (1.8% (1.8%) 1.9% (2.8% (1.8%)