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Before the war on Iran began in late February, Europe’s central banks enjoyed a more benign inflation outlook as interest rates looked set to remain stable or keep falling across the region.
But the conflict has upset the economic equilibrium, threatening Europe’s energy supplies, growth and the outlook for consumer prices. Expectations for interest rates across the continent have been upended.
On Thursday, the European Central Bank, Bank of England, Sweden’s Riksbank and Swiss National Bank are all set to deliver their latest monetary decisions. Each central bank is also likely to deliver it first comments on how the U.S. and Israel’s war on Iran, which began in late February, is likely to impact their decision-making.
Even before the war began, the ECB was not expected to change its stance on its benchmark interest rate, with euro zone inflation data remaining near the central bank’s 2% target. The latest flash data from Eurostat showed inflation in the euro zone rose to 1.9% in February, up from 1.7% in January.
