European Central Bank and Bank of England warn of inflation risks but hold interest rates 🔥
The European Central Bank has kept its main interest rate unchanged at 2%, but warned that inflation could rise further and economic growth turn out weaker because of the effects of the Iran war.
“The longer the war continues and the longer energy prices remain high, the stronger is the likely impact on broader inflation and the economy,” the ECB said in a statement Thursday.
Data published earlier Thursday showed that inflation across the 21 countries that use the euro climbed to 3% in April, from 2.6% in March.
Earlier, the Bank of England also held its benchmark interest rate steady, at 3.75%. However, the BOE warned that borrowing costs could rise in future if a prolonged spike in energy prices puts further upward pressure on inflation.
Before the war, UK inflation was on track to fall to the central bank’s 2% target from this month. Inflation stood at 3.3% in March and the BOE now expects it to rise to a little more than 3.5% by the end of the year.
“This change in the inflation outlook is a direct consequence of the conflict in the Middle East,” BOE Governor Andrew Bailey told reporters.