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ECB Keeps Rates Unchanged, Warns on Potential Impact of Middle East Crisis on Inflation

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The European Central Bank maintained its three key interest rates on Thursday even as it sounded the alarm on the potential impact of a prolonged conflict in the Middle East on inflation and economic growth.

The central bank's deposit facility rate remains at 2%, while the interest rates on main refinancing operations and marginal lending facility were also unchanged at 2.15% and 2.40%, respectively. The decision was consistent with the consensus estimate, with the rates unchanged since June 2025.

Preliminary data released earlier the same day showed annual inflation in the eurozone accelerated to 3% in April from 2.6% in March, mainly due to a surge in energy prices.

"The war in the Middle East has led to a sharp increase in energy prices, pushing up inflation and weighing on economic sentiment," the central bank said. "The implications of the war for medium-term inflation and economic activity will depend on the intensity and duration of the energy price shock and the scale of its indirect and second-round effects. The longer the war continues and the longer energy prices remain high, the stronger is the likely impact on broader inflation and the economy."

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