Central banks remain at a standstill, but are on maximum alert. After the Fed, the European Central Bank and the Bank of England left rates unchanged. In the Eurozone,The deposit rate therefore remains at 2%.The prime refinancing rate remains at 2,15%, while the marginal lending rate remains at 2,40%. In the United Kingdom, the bank rate remains at 3,75%.
"Upside risks to inflation and downside risks to growth have intensifiedThe Governing Council is committed to setting monetary policy so as to ensure that inflation stabilizes at its medium-term objective of 2%,” the ECB note reads. The decision on rates “was unanimous” but at the meeting there was discussed at length various options including a raise“, revealed the president of the ECB, Christine Lagarde in the usual post-meeting press conference.
Lagarde: "The war in the Middle East has caused a sharp increase in energy prices."
Just this morning Eurostat announced that in the Eurozone, annual inflation is expected to remain at 3% in April 2026, up from 2,6% in March. On a monthly basis, the increase is estimated to be around 1%, while analyzing the main components, the energy sector is expected to record the highest annual rate in April (10,9%, compared to 5,1% in March), followed by services (3,0%, compared to 3,2% in March), food, alcohol, and tobacco (2,5%, compared to 2,4% in March), and non-energy industrial goods (0,8%, compared to 0,5% in March).
“The conflict in the Middle East – the Central Bank explained – has caused a sharp increase in energy prices, pushing up inflation and weighing on confidence. The implications of the war for 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,” said the head of the Eurotower.
“The longer the war continues and the longer energy prices remain high, the greater the likely impact on broader measures of inflation and the economy,” Lagarde continued.
Lagarde: "Growth is slowing, uncertainty is high, and pressure is on the supply chain."
“The polls indicate a slowing growth, "While consumers and businesses have become less confident about the future since the war began," the President of the European Central Bank explained during the press conference. "Longer delivery times and rising input prices suggest that supply chains are coming under pressureLooking ahead, high energy costs are expected to continue to weigh on real incomes, making households and businesses more reluctant to consume and invest. The economy, Lagarde continued, is moving away from the baseline scenario indicated in the March projections. "Risks remain to the downside" for growth. Government fiscal measures to address the energy shock must be "temporary, targeted, and tailored," she clarified, answering questions from journalists.
“The level of uncertainty is such that it requires a new evaluation in the next meeting“, continued Lagarde, according to whom “these six weeks will be the right time to assess developments, understand in particular the evolution of the conflict – or even its lack of evolution, which will be informative in itself – and make a decision based on verified and updated information that we will receive in the coming months.”
“The war in the Middle East remains a downside risk for the euro area economy, "This could exacerbate an already volatile global economic policy environment," the banker continued. "A prolonged disruption to energy supplies could further increase energy prices and keep them high for longer than currently expected. These factors would erode incomes and make businesses and households more reluctant to invest and spend. The drag on growth would intensify if the closure of key shipping routes caused severe shortages of essential production factors, forcing euro area firms to reduce production."
Boe: Rates remain unchanged in the United Kingdom as well
With a majority of 8 to 1, the Bank of England voted to keep rates steady at 3,75%, but is considering raising them to counter inflation. The dissenting member instead voted for a 25 basis point increase, bringing the rate to 4%. The decision, the institute explained, comes amid heightened uncertainty on the energy front, generated by conflict in the Middle EastThe BoE acknowledged that “monetary policy cannot influence energy prices,” but that it will be calibrated to ensure that the economic adjustment to those prices occurs in a way that sustainably achieves the 2% inflation target.
Last night, at Jerome Powell's last meeting as governor, the Fed also left rates unchanged for the third consecutive time, keeping them at 3,5-3,75%.
