The ECB Governing Council decided, as expected, to raise the cost of borrowing by 25 basis points. The interest rates on the deposit facility, the main refinancing operations, and the marginal lending facility will consequently rise to 2.25%, 2.40%, and 2.65%, respectively.

"The conflict in the Middle East is generating inflationary pressures," the statement reads, "and the decision to raise rates is robust against a range of scenarios that outline how the shock could evolve and impact the medium-term outlook for the euro area."

"The outlook remains uncertain, with upside risks to inflation and downside risks to economic growth," the ECB statement continues. "The overall implications of the war for inflation and growth in the medium term will depend on the intensity and duration of the energy price shock, as well as the extent of its indirect and second-round effects."

With today's decision, the Governing Council remains well-positioned to address the uncertainty caused by the war. In determining the appropriate monetary policy stance, it will monitor the situation closely and adopt a data-driven approach, with decisions being taken on a case-by-case basis at each meeting.

(Unioneonline)