The European Central Bank (ECB) has left interest rates unchanged but hinted that an increase could be on the way, possibly as early as June.
The Frankfurt-based bank left interest rates unchanged at their monthly meeting on Thursday while signalling rising concerns over soaring inflation.
At their meeting policymakers kept the bank’s key deposit rate at 2% where it has been since June 2025, while warning “the upside risks to inflation and downside risks to growth have intensified” as a result of the Iran war.
Inflation jumped to 3% this month, well above the bank's 2% target, and a further rise is expected as the Iran war has pushed oil prices to a four-year high.
ECB President Christine Lagarde said the final decision to hold rates was unanimous but told a press conference a possible rate hike had been discussed "at length" by policymakers.
"We made an informed decision based on as-yet insufficient information," she said, adding that their next meeting in June would be the "right time" for a new assessment.
"There is such uncertainty that we need to understand and revisit that at our next policy meeting," she said. "We are certainly moving away from our baseline," she said of a scenario built around an early end to the war and a limited energy shock.
Earlier, the ECB said in a statement that upside risks to inflation and downside risks to growth had both intensified.
"The longer the war continues and the longer energy prices remain high, the stronger is the likely impact on broader inflation and the economy," it said.
According to The Irish Times, several analysts are predicting a quarter-point rate hike at the ECB’s next meeting in June and markets are pricing in two to three rate increases this year.
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