ECB holds interest rates as energy prices push up inflation

The European Central Bank has kept interest rates unchanged, as widely expected, despite rising energy prices and growing economic uncertainty.

The bank left its key deposit rate at 2 per cent, where it has remained since June last year.

In a statement, the ECB warned that risks to inflation are increasing, while economic growth is weakening. It said the war in the Middle East has driven up energy prices, putting pressure on both households and businesses.

Higher energy costs are “pushing up inflation and weighing on economic sentiment”, the bank said, adding that the longer the conflict continues, the greater the impact on the wider economy.

The ECB aims to keep inflation at around 2 per cent over the medium term. However, eurozone inflation is currently above that target.

ECB president Christine Lagarde is expected to give more details at a press conference later on Thursday.

For now, the bank is taking a wait-and-see approach, similar to other major central banks, as it balances the need to control inflation against the risk of slowing growth.

Markets are now watching closely to see whether the ECB will raise interest rates at its next meeting in June.

^{ECB president Christine Lagarde © Kirill KUDRYAVTSEV / AFP}