30 April 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 with the Bank of England earlier today, the European Central Bank has a very limited ability to impact inflation and thus for now interest rates remain on hold. The central bank has said it will take a meeting-by-meeting approach, and quite frankly it has no choice but to do so given how fluid the situation in the Middle East is and the potential for things to change dramatically over the course of even a day.
“That said, the ECB has said it remains prepared to do what is necessary to keep inflation in check. Europe, however, continues to suffer from low economic growth and this risks being exacerbated by the inflationary pressures that are becoming apparent.
“However, the ECB is starting at a very different place to most other central banks, with interest rates starting at a much lower point. Therefore, it has some room to raise rates should the inflation we are beginning to see become more ingrained in general prices, while not hurting growth too significantly.
“But equally, so much of the path for interest rates is effectively decided by what the US and Iran do next. No resolution appears to be coming and as such the blockade or ports and the closure of the Strait of Hormuz is likely to be prolonged, keeping energy prices higher for longer. In this scenario, the ECB may find itself backed into a corner with no choice but to raise rates, despite the desperate need for economic growth across the continent.”
