ECB Holds Rates Steady Amid Ongoing Energy Price Volatility
The European Central Bank (ECB) held interest rates steady at 2.25% on Thursday amid ongoing uncertainty about how volatile energy prices will affect inflation.
The decision was made after a quarter-point hike in June, which aimed to dampen the impact of higher oil prices due to the US-Iran war and subsequent interruption of oil shipments through the Strait of Hormuz.
Analysts say the ECB may be taking a pause to gather more information amid swings in oil prices, which have fluctuated since the announcement of a ceasefire. Oil prices fell after the ceasefire but rose again when fighting resumed.
'Uncertainty remains high and the full inflationary impact of the energy shock has yet to play out,' ECB President Christine Lagarde said at a post-decision news conference. 'We are therefore closely monitoring the intensity and duration of the shock, as well as its indirect and second-round effects...the longer energy prices stay high, the more likely they are to drive up broader inflation.'