On March 19, an individual rides a bicycle by the Bank of England in central London. Henry Nicholls/AFP/Getty Images
The European Central Bank has maintained its primary interest rate at 2%, but cautioned that inflation may increase and economic growth could be weaker due to the impacts of the Iran conflict.
“The longer the conflict persists and energy costs stay elevated, the greater the probable effect on overall inflation and the economy,” the ECB stated in a announcement on Thursday.
Data released earlier Thursday indicated that inflation in the 21 countries utilizing the euro increased to 3% in April, up from 2.6% in March.
Previously, the Bank of England maintained its benchmark interest rate at 3.75%. Nonetheless, the BOE cautioned that borrowing expenses might increase later if a sustained surge in energy costs exerts additional upward pressure on inflation.
Prior to the war, UK inflation was set to decrease to the central bank’s 2% target starting this month. Inflation was at 3.3% in March, and the BOE now anticipates it will increase to just above 3.5% by year’s end.
“This shift in the inflation forecast is a direct result of the Middle East conflict,” BOE Governor Andrew Bailey informed journalists.