Key rates held steady as inflation risks increase

The European Central Bank's Governing Council decided to keep its three key interest rates unchanged.

The deposit facility rate remains at 2.00 percent, the main refinancing operations rate at 2.15 percent, and the marginal lending facility rate at 2.40 percent.

While newly available data largely align with the Governing Council's previous assessment of inflation prospects, upside risks to inflation and downside risks to growth have increased.

The war in the Middle East has led to a significant rise in energy prices, which is driving up inflation and weighing on economic sentiment.

The Governing Council remains firmly committed to aligning its monetary policy to ensure inflation stabilizes at its 2 percent medium-term target.

The full impact of the war on medium-term inflation and economic activity will depend on the intensity and duration of the energy price shock, as well as the extent of its indirect and second-round effects.

The ECB Governing Council remains well-equipped to manage the current uncertainty.

The euro area economy has proven resilient in recent quarters, with the inflation rate near the 2 percent target when energy prices began to rise.

Longer-term inflation expectations remain firmly anchored, though short-term expectations have risen considerably.

The Governing Council will continue to monitor the situation closely, adopting a data-dependent approach and deciding meeting-by-meeting on the appropriate monetary policy course.

Its interest rate decisions will be based on its assessment of the inflation outlook and associated risks, considering current economic and financial data, underlying inflation dynamics, and the strength of monetary policy transmission.

The Governing Council does not pre-commit to a particular interest rate path.