Monetary Policy

According to the latest data, economic growth in the euro area has slowed somewhat, largely because of the war in the Middle East. At the same time the higher energy prices caused by developments in the Strait of Hormuz are driving inflation up slightly. Meanwhile the medium-term inflation expectations remain relatively stable, with a prevailing view that the war in the Middle East will end quickly enough to allow inflation to return to our target rate over the medium term.

These conditions allowed us to leave interest rates unchanged at the latest monetary policy meeting, but we will examine the situation again at upcoming meetings. At that time more information will be available, and it might be clearer how the war will unfold; we will be able to analyse the impact of the shock through the prism of the updated macroeconomic projections.