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The European Central Bank kept the main interest rates unchanged, amid ongoing risks of worsening inflationary pressures due to rising energy prices as a result of the war in the Middle East.

The bank announced in its meeting on (Thursday) that it is maintaining the main interest rate at 2.25%, in line with expectations, indicating that the full impact of the energy price shock on inflation has not yet become clear.

Oil Implications

The bank clarified in its statement issued today that it is closely monitoring the implications of oil prices, reaffirming its commitment to bringing inflation back to its medium-term target of 2%.

The central bank added that it will not commit in advance to a specific path for interest rates, noting that its future decisions will depend on its assessment of inflation expectations and the surrounding risks.

Target Level

In the United States, the debate over the monetary policy path has resurfaced following statements from several officials of the U.S. Federal Reserve, with increasing signs of broad support for maintaining a hawkish approach to tackle inflation, despite market expectations for the central bank to keep interest rates unchanged in its upcoming meeting on July 28 and 29.

The Federal Reserve Chairman Kevin Warsh, during his testimony before the House Financial Services Committee, affirmed that the central bank "will not tolerate" inflation, and that the battle to bring prices back to the target level is not over yet, reflecting a commitment to prioritize price stability despite political pressures calling for interest rate cuts.