ECB Keeps Interest Rates Steady Amid Iran War Energy Price Concerns

The European Central Bank maintained its key interest rate at 2% Thursday, citing uncertainty from the Iran war's impact on energy costs and inflation. The decision follows similar moves by the Bank of England and Federal Reserve to hold rates steady.

FRANKFURT, Germany — European monetary officials decided Thursday to maintain current interest rate levels while expressing concern that ongoing conflict in Iran could drive up consumer prices through elevated energy costs, though officials acknowledged the long-term economic effects remain unclear.

The European Central Bank’s governing council kept its primary deposit rate steady at 2%, a level maintained since June 2025.

Bank officials stated the conflict “has made the outlook significantly more uncertain, creating upside risks for inflation and downside risks for economic growth.” Their post-meeting announcement indicated that long-term inflation forecasts stayed “well anchored” and future rate decisions would depend on economic data as it becomes available.

The Iranian conflict presents a challenge for global monetary policymakers: rising energy costs may push inflation higher in coming months, while prolonged energy market disruption could eventually slow economic expansion. Typically, central banks increase rates to combat rising prices and reduce them to encourage growth.

The European decision came after Britain’s central bank earlier Thursday chose to maintain its primary rate at 3.75% as dramatic increases in oil and natural gas prices following the Iran conflict’s onset have reignited inflation worries.

This follows Wednesday’s announcement by America’s Federal Reserve to maintain its benchmark rate unchanged.

Federal Reserve Chairman Jerome Powell emphasized the growing uncertainty facing America’s economic and inflation outlook due to the Iran conflict, indicating the Fed may maintain current policy for an extended timeframe.

European inflation has declined from double-digit highs to 1.9% in February, aligning with the central bank’s 2% objective.