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Frankfurt: European Central Bank President Christine Lagarde warned on Thursday that tensions in the Middle East and disruption to shipping in the Red Sea could lead to higher inflation rates again.
She told reporters in Frankfurt: “Risks that could lead to a rise in inflation include a rise in geopolitical tensions, particularly in the Middle East, which could lead to higher energy prices and shipping costs in the short term and hamper global trade.”
This came after the European Central Bank decided on Thursday to set its key interest rate at a record 4 percent, suggesting that core inflation continued to fall, thanks in part to increased borrowing costs.
“The downward trend in core inflation has continued and previous interest rate hikes continue to have a strong impact on financing conditions,” the ECB said.
With its decision on Thursday, the European Central Bank kept the interest rate on bank deposits, a benchmark for borrowing costs in the euro zone, at 4 percent, the highest level since the bank was founded, and confirmed it will remain at that level for some time.
Lagarde confirmed at the same press conference that there was a “consensus” at Thursday’s meeting that “it is still too early to discuss rate cuts.”
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