19 March 2026
If you are covering the European Central Bank’s decision to leave interest rates unchanged, please find below a comment from Richard Carter, head of fixed interest research at Quilter Cheviot:
“As expected, the European Central Bank has kept interest rates on hold as it waits to assess the impact of the ongoing conflict in the Middle East. The ECB is well ahead of other central bank peers by having interest rates at 2% and inflation near enough at target, and as such has the space to adapt to the changing geopolitical picture. That said, events of recent years will be fresh in the mind of policy makers when they meet in the coming months.
“The ECB will not want to repeat the events of 2022, when the central bank was slow to respond to the inflation spike that came following the easing of Covid restrictions and Russia’s invasion of Ukraine. As a result, and given the headroom available, you could conceivably see the ECB make a move to raise interest rates once or twice this year to pre-empt any inflationary spike as a result of a sustained rise in energy prices.
“Of course so much of this is dependent on what happens in the Middle East and if Donald Trump can end this war claiming some kind of victory. But latest developments show no such de-escalation is coming and thus central bankers need to be prepared for the looming inflation spike. What may be difficult is finding what is the most appropriate level of action given the sluggish economic growth still being experienced in Europe. Any inflation spike will naturally act as a brake on economic growth, so it is important the ECB does not overtighten and keeps focus on the economic outlook. This is of course very difficult with such a moving picture in the Middle East and thus the outlook for interest rates is very much up in the air from here.”
