The European Central Bank kept interest rates on hold at its April meeting, despite a surge in inflation in the euro zone since the war in Iran began.
The ECB’s governing council opted to hold its benchmark deposit facility rate at 2% on Thursday.
In a statement, the bank said that while its previous assessment of the inflation outlook was largely unchanged, “the upside risks to inflation and the downside risks to growth have intensified.”
It said its Governing Council remained committed to setting monetary policy to ensure that inflation stabilizes at the 2% target in the medium term.
Acknowledging that the war in the Middle East had led to a sharp increase in energy prices, pushing up inflation and weighing on economic sentiment, the ECB noted that “the implications of the war for medium-term inflation and economic activity will depend on the intensity and duration of the energy price shock and the scale of its indirect and second-round effects.”
