The European Central Bank (ECB) once again left its key interest rates unchanged on Thursday, as expected by observers.
The deposit remuneration rate, the main interest rate of the institution, remains at 2%. The rate for main refinancing operations is still at 2.15% and the marginal lending facility rate at 2.40%.
“The war in the Middle East has significantly increased uncertainty surrounding the outlook, creating risks of inflation and downside risks for economic growth. It will have a significant impact on short-term inflation through energy price increases. Its medium-term implications will depend on the intensity and duration of the conflict as well as how energy prices affect consumer prices and the economy,” emphasized the ECB in its statement.
Inflation in the euro zone is still below the ECB’s 2% medium-term target but slightly rose in February. The Harmonized Index of Consumer Prices (HICP) stood at 1.9% year-on-year in February within the monetary union, up from 1.7% in January, according to definitive data published on Wednesday by the European statistical agency Eurostat.
Inflation in the euro zone fluctuated between 2% and 2.2% between August and December.
The US and Israel’s war against Iran, which began on February 28th, is reshaping inflation dynamics as oil prices have surged. The Brent crude oil barrel was trading around $73 before the conflict. It now hovers around $115, up 56% since the conflict began.
The escalation of attacks on oil and gas infrastructure in the Persian Gulf has raised concerns about a new dangerous phase in the war between the US, Israel, and Iran, posing a threat to the global energy crisis. On Wednesday, Iran struck gas sites in the Gulf countries, causing “considerable” damage to the Ras Laffan liquefied natural gas (LNG) complex in Qatar, which accounts for 20% of the global LNG supply, according to RFI. Tehran responded to the attack by targeting its offshore gas site in South Pars.
The ECB has maintained its interest rates during its past five meetings. The last rate reduction by the monetary institution dates back to June last year. It was the eighth rate cut in a year, halving the deposit remuneration rate from June 2024 to June 2025.
On Wednesday evening, the Federal Reserve (Fed) kept its interest rate within a range of 3.5% to 3.75% and showed reluctance to further ease its monetary policy, due to inflation risks arising from the surge in oil prices.
The Bank of Japan, Swiss National Bank, Swedish Riksbank, and the Bank of England also opted for unchanged monetary policies on Thursday.
(Agefi-Dow Jones The financial newswire)
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