ECB Holds Interest Rates and Warns of Iran War Risks

• The European Central Bank (ECB) kept its key interest rate on hold Thursday, April 30, 2026, as it warned that risks to growth and inflation had “intensified” as a result of the war in the Middle East. The central bank for the 21 countries that use the euro left its benchmark deposit rate at 2.0%, where it has been since June last year.
• 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 stabilises 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.”
• “The longer the war continues, and the longer energy prices remain high, the stronger the likely impact on broader inflation and the economy,” the bank stressed. The ECB noted that it would closely monitor the situation and take a data-dependent and meeting-by-meeting approach to determining its monetary policy stance. Policymakers would not pre-commit to a particular rate path, it emphasised.
• The ECB’s decision came after flash data out Thursday showed inflation in the euro zone jumped to 3% in April, driven largely by a rise in energy costs in the region. Growth slowed in the first quarter, expanding by a meager 0.1%.

(Sources: CNBC & Euractiv)