The European Central Bank (ECB) held interest rates steady on Thursday, as expected, but the war in the Middle East has significantly changed the bank's expectations for the year. The ECB is thus raising the expected inflation in 2026 to 2.6 percent from the previous 1.9 percent. This is stated in a press release on Thursday.
- Inflation has been adjusted upwards compared to the projections from December, especially for 2026. This is due to energy prices being higher due to the war in the Middle East, writes the ECB.
Chief economist at Dansk Erhverv Tore Stramer believes that this could "open the door" for interest rate increases later in the year.
- It is certainly one of the absolute rarities that the ECB makes such major revisions to their forecast, he says in a written comment.
At the same time, expectations for this year's economic growth are being lowered from 1.2 to 0.9 percent. This "reflects the global effects of the war on commodity markets, real incomes and confidence", the ECB writes. But even though the central bank sees more risks, it is still largely unclear how the economy will develop. It depends on how intense and prolonged the war will be, it says.
- The war in the Middle East has made the outlook considerably more uncertain and created risks of higher inflation and lower economic growth, the bank writes.
/ritzau/
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