EU flags flutter outside the European Central Bank headquarters in Frankfurt, Germany, in March. [Reuters]
EU flags flutter outside the European Central Bank headquarters in Frankfurt, Germany, in March. [Reuters]

The European Central Bank held all three of its key policy rates steady on Thursday local time.

At a monetary policy meeting in Frankfurt, Germany, the ECB kept its deposit rate at an annual 2.25%, while holding the main refinancing rate and the marginal lending rate at 2.40% and 2.65%, respectively.

The gap between the ECB's deposit rate — its primary monetary policy benchmark — and South Korea's benchmark interest rate (2.75%) remained at 0.50 percentage points, while the spread with the United States (3.50–3.75%) held at 1.25–1.50 percentage points.

Earlier, as inflation concerns mounted following the Iran war, the ECB raised all three policy rates by 0.25 percentage points at last month's meeting. It was the bank's first rate increase since September 2023, nearly two years and nine months prior.

Consumer price inflation in the eurozone — the 21 countries using the euro — jumped from 1.7 percent year-on-year in January, before the war, to 3.2 percent in May. It eased to 2.8 percent last month as international oil prices stabilized, but remains above the ECB's 2.0 percent target.

Analysts widely expect the ECB's future rate path to hinge on the trajectory of global oil prices. With prices rising again amid an escalating armed conflict between the United States and Iran, some observers now forecast as many as three additional rate hikes.

"The energy price outlook is similar to the June baseline scenario and remains well above pre-Middle East conflict levels," the ECB said. "We are monitoring the intensity and duration of this shock, as well as any second-round effects."


yckim6452@heraldcorp.com