ECB Holds Rates as Energy and Climate Risks Keep Inflation Bias to Upside

Christine Lagarde, President of the European Central Bank (ECB), announced that the ECB kept its key interest rates unchanged at its July policy meeting. This decision comes as inflation risks remain skewed to the upside due to potential energy shocks and climate-related events.

Lagarde cited the possibility of an energy shock intensifying, which could lead to second-round effects if energy prices stay elevated for longer. She also pointed out that extreme weather events linked to the climate crisis may push up food prices.

The ECB has observed relatively benign market developments since its June decision, including a post-MOU fall in Brent crude that was faster than anticipated. The bank's assessment covered the density, durability, and propagation of the supply shock.