The European Central Bank (ECB) has once again left its key interest rates unchanged on Thursday, as expected by observers.
The deposit facility rate, the main benchmark rate of the institution, remains at 2%. The rate on the main refinancing operations is still fixed at 2.15% and the marginal lending facility rate at 2.40%.
“The Middle East conflict has significantly increased uncertainty about the outlook, creating upside risks for 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 and how energy prices affect consumer prices and the economy,” the ECB highlighted in its statement.
Inflation in the eurozone remains below the ECB’s medium-term target of 2%, but it slightly rose in February. The harmonized index of consumer prices (HICP) stood at 1.9% year-on-year in February within the monetary union, compared to 1.7% in January.
Inflation in the eurozone fluctuated between 2% and 2.2% between August and December.
The US and Israel’s war against Iran, triggered last February 28, is reshaping inflation dynamics as oil prices have surged. The Brent crude oil barrel price was around $73 before the conflict and now hovers around $115 per barrel.
Attacks on Persian Gulf oil and gas infrastructure have escalated the conflict between the US, Israel, and Iran, threatening to aggravate the global energy crisis. Iran struck gas sites in Gulf countries, causing significant damage to the Ras Laffan liquefied natural gas (LNG) complex in Qatar, representing 20% of the global LNG supply, according to RFI. Tehran retaliated against an attack on its South Pars offshore gas site.
The ECB has maintained its interest rates unchanged in its past five meetings. The last rate cut by the ECB dates back to June last year. It was the eighth rate cut within a year, resulting in halving the deposit facility rate.
On Wednesday night, 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 given the inflationary risk from oil price spikes.
The Bank of Japan, Swiss National Bank, Swedish central bank (Riksbank), and Bank of England have also opted for unchanged monetary policies on Thursday.
Agefi-Dow Jones The financial newswire
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