ECB Holds Rates Steady Amid Middle East Conflict and Rising Oil Prices
The European Central Bank (ECB) kept its key deposit rate unchanged at 2.25% during its latest meeting, citing high uncertainty and the ongoing inflationary impact of the Middle East war. Renewed fighting between Iran and the United States has slowed traffic through the Strait of Hormuz, restricting energy exports on a waterway that carries about a fifth of the world's oil and natural gas. Brent crude oil prices have risen above $98 per barrel, the highest since late May, and Iran-aligned Houthi rebels struck two Saudi oil tankers in the Red Sea. The ECB warned that the full inflationary impact of the energy shock has yet to play out and is closely monitoring the intensity and duration of the conflict. The bank faces a stagflation dilemma: cutting rates to boost growth could worsen inflation, while raising rates to tame inflation could slow growth further. Observers expect the ECB to wait for clarity on the conflict's duration before making further moves. Investors await ECB President Christine Lagarde's press conference for hints on future rate policy.
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