"Despite Iran War... ECB Expected to Hold Rates Steady in April"

According to a report by Bloomberg on April 15 (local time), the European Central Bank (ECB) is leaning toward holding interest rates steady ahead of its April rate decision.

Bloomberg, citing sources within the ECB, reported that the economic indicators to be released before the upcoming rate-setting meeting scheduled for April 29-30 may not provide clear answers regarding the extent to which the ongoing war between the United States/Israel and Iran has affected economic growth, supply chains, and inflation prospects.

European Central Bank Headquarters in Frankfurt, Germany. Photo by Reuters Yonhap News.

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The sources said that the current tight financial conditions are helping to stabilize inflation expectations for the time being, and that further rate hikes may not bring significant changes to market prices. Even under the current circumstances, inflation forecasts remain subdued, and since the market has already priced in the possibility of a rate increase, the impact of an actual hike would likely be limited.

They backed up their views by referencing the ECB's delayed response to surging inflation following Russia's invasion of Ukraine in 2022, as well as the two rate hikes implemented during the 2011 eurozone debt crisis, which were quickly reversed. This suggests that the ECB is seeking the right timing for a rate hike that is neither too hasty nor too late.

ECB President Christine Lagarde's interview with Bloomberg TV the previous day also supports these remarks from ECB sources. She said that the eurozone economy has deviated from the ECB's baseline projections due to rising energy costs, but that this does not warrant a rate hike. She also emphasized that the ECB needs to respond with complete agility in its rate policy, but that there is no preference for further rate increases.

Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF), also said in an interview with Bloomberg TV that central banks should exercise restraint in raising borrowing costs too quickly, as doing so could harm economic growth.

The war in Iran has caused a sharp rise in energy costs, pushing the eurozone's preliminary consumer price index (CPI) for March up to 2.5 percent, the highest level since January 2025. Whether this upward trend continues will depend on the duration of the war. Governments and central banks in various countries are lowering their economic growth outlooks, and companies are expressing concerns about weakening demand. Investors are expecting two rate hikes of 0.25 percentage points each this year.

However, on the same day, Joachim Nagel, President of Germany's central bank, the Bundesbank, said, "It is still uncertain what will happen in April." He added, "A lot of new information may emerge in the next two weeks, and we will take that into account."

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