SerpApi.Org
FRANKFURT, Germany (AP) — The European Central Bank left interest rates unchanged Thursday amid uncertainty about how volatile energy prices will affect inflation.
The central bank for the 21 countries that use the euro currency left its benchmark rate unchanged at 2.25% following a quarter-point hike at its previous meeting June 11. That increase was aimed at dampening the impact on consumer prices from higher oil prices due to the US-Iran war and subsequent interruption of oil shipments through the Strait of Hormuz.
Analysts say the bank may simply be taking a pause to gather more information amid swings in oil prices, which fell after announcement of a ceasefire but then rose again when the ceasefire agreement collapsed and fighting resumed. Economists are pointing toward the bank's Sept. 10 meeting as a possibility for another rate increase.
“Uncertainty remains high and the full inflationary impact of the energy shock has yet to play out," ECB President Christine Lagarde said at a post-decision news conference. "We are therefore closely monitoring the intensity and duration of the shock, as well as its indirect and second round effects”
Lagarde said the bank is making decisions meeting by meeting based on incoming data and has not committed to any particular path for rates.
Rate hikes combat inflation by raising the cost of credit for buying things, from new houses to new factories. That cools demand for goods and eases pressure on prices. Inflation in the eurozone ran at an annual 2.8% in June, down from 3.2% in May.
International benchmark Brent crude rose to $99 Thursday following US President Donald Trump’s July 8 declaration that a memorandum of understanding about a ceasefire and future talks was “ over.” Oil had trade around $76 before the ceasefire collapsed, not far from its prewar level of around $73.
Brent rose 4% on Thursday after Iranian-backed Houthi rebels attacked two Saudi oil tankers near the Bab al-Mandeb Strait, raising doubts about Saudi Arabia’s ability to ship oil through the Red Sea instead of the Strait of Hormuz.
