ECB leaves rates unchanged, but says impact from war still to play out

(Sharecast News) - The European Central Bank on Thursday left its key interest rate unchanged despite the recent rise in oil prices, but acknowledged that the inflationary impact of the Middle East conflict has yet to fully play out. The ECB kept the deposit facility rate at 2.25%, after raising rates by 25 basis points in June for the first time in a year, as was widely expected by the market.

The main refinancing operations rate was also left at 2.4%, and the marginal lending facility at 2.65%.

In a statement accompanying its decision, the ECB Governing Council said it "stands ready to adjust all of its instruments within its mandate" to ensure inflation comes down and stabilises at the 2% target in the medium term.

However, it added that the current energy price outlook wasn't too severe.

"The outlook for energy prices, while highly volatile, currently stands close to the baseline of the June Eurosystem staff projections and well above the levels recorded prior to the conflict in the Middle East," the ECB said.

"Uncertainty remains high and the full inflationary impact of the energy shock has yet to play out. The Governing Council is therefore closely monitoring the intensity and duration of the shock, as well as its indirect and second-round effects."

Oil prices were higher for the fifth straight session on Thursday after Iranian-backed Houthi militants targeted two Saudi oil tankers in the Red Sea and Donald Trump threatened once again to bomb Iranian infrastructure.

Brent was up 5.1% at $98.87 a barrel, hitting levels not seen in two months, amid concerns of further supply disruptions.