The European Central Bank is expected to leave interest rates unchanged today, maintaining its deposit rate at 2 percent, after similar restraint shown by the Fed yesterday amid surging oil prices.
Policymakers are assessing the economic effects of the Iran war, with a focus on medium-term impacts rather than immediate energy price movements. President Christine Lagarde has pointed to the “double uncertainty” around how long the shock will last and how strongly it will pass through to inflation, Bloomberg reported today.
Economists surveyed by Bloomberg expect the ECB to begin raising rates later this year, with a quarter-point increase projected for June and additional moves priced in by markets.
Energy prices remain a central factor. Brent crude has risen above 125 dollars per barrel, its highest level in four years. Before the escalation of the conflict in late February, prices were around 70 dollars per barrel. The increase has been linked to uncertainty around Iran and reports of potential new US military actions, according to Financial Times coverage cited in Finnish media.
In the United States, the Federal Reserve held its policy rate unchanged yesterday at 3.5 to 3.75 percent. The central bank said “economic activity has been expanding at a solid pace,” while noting that “inflation is elevated, in part reflecting the recent increase in global energy prices.”
The Fed added that it will “carefully assess” incoming data before making further decisions and remains committed to returning inflation to its 2 percent target.
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