FRANKFURT, Germany (AP) — The European Central Bank left interest rates unchanged Thursday amid uncertainty about how volatile energy prices will affect inflation.The central bank for the 21 countries that use the euro currency left its benchmark rate unchanged at 2.25% following a quarter-point hike at its previous meeting June 11. That increase was aimed at dampening the impact on consumer prices from higher oil prices due to the US-Iran war and subsequent interruption of oil shipments through the Strait of Hormuz.Analysts say the bank may simply be taking a pause to gather more information amid swings in oil prices, which fell after announcement of a ceasefire but then rose again when the ceasefire agreement collapsed and fighting resumed. Economists are pointing toward the bank's Sept.
10 meeting as a possibility for another rate increase.“Uncertainty remains high and the full inflationary impact of the energy shock has yet to play out," ECB President Christine Lagarde said at a post-decision news conference. "We are therefore closely monitoring the intensity and duration of the shock, as well as its indirect and second round effects...the longer energy prices stay high, the more likely they are to drive up broader inflation.”Lagarde said the bank is making decisions meeting by meeting based on incoming data and has not committed to any particular path for rates.Lagarde also faced a question about whether she would commit to serving out her full, eight-year term which ends in October 2027.Asked for a “yes or no” response, she said: “You know, I hate to be boxed in in any particular circumstances."She added that “you are not going to see the back of me before 2027” and that “when there clouds on the horizon, the captain stays on the ship, and this captain is staying on this ship as long as there are clouds on the horizon.”Rate hikes combat inflation by raising the cost of credit for buying things, from new houses to new factories. That cools demand for goods and eases pressure on prices.
Inflation in the eurozone ran at an annual 2.8% in June, down from 3.2% in May.International benchmark Brent crude rose to $100 Thursday, the first time in two months, after Yemen’s Iran-backed Houthi rebels said they attacked two Saudi oil tankers in the Red Sea, potentially widening the conflict in and around Iran.Brent spiked 7% after Iranian-backed Houthis launched t… Federal Reserve chairman Kevin Warsh testified before Congress over two days last week, totaling more than five hours. Yet it was comments from several of his colleagues that gave the clearest picture of what the central bank is likely to do at next week's policy meeting.Why it matters: It is a central paradox of Warsh's communications strategy.
He is determined to get out of the business of giving markets and the public much guidance on future policy, which means the markets fill in the gaps based on comments from other officials.That isn't necessarily a bad thing — it preserves flexibility on interest rate policy that was diminished when former Fed chiefs all but preannounced upcoming rate moves.But it also means that Warsh has ceded some of the power to set expectations, which raises the risk of more surprise and volatility around future actions.State of play: The central bank's policy committee meets next week, and Warsh declined to offer much in the way of guidance on what it will do, instead promising a "family fight" that seeks to arrive at the best decision.Other officials were a little more specific. Fed governor Christopher Waller, speaking on July 13, said that incoming June inflation data could tilt him toward favoring a near-term rate hike. That inflation data was soft, implying that he will be patient.Governor Lisa Cook, speaking two days later, said, "If we do not see signs of disinflation soon, I am prepared to act," suggesting that she is happy to leave rates steady for now, but is on a short fuse for favoring rate hikes.Zoom in: Most notably, vice chair Philip Jefferson said on Thursday that "in a scenario where actual inflation does not start to cool down soon, I believe that it could be appropriate to reconsider our current policy stance to ensure we fulfill our commitment to deliver price stability."With no major inflation data due between Jefferson's speech and the July policy meeting, that implies no rate adjustment on July 29 but a high alert to change course if inflation numbers for July and August come in hot.The message carries particular weight coming from the Fed's No.
2 official, although the contours of his role in the Warsh Fed are still coming into focus.Of note: We also got some visibility into potential dissents from a no-rate-change decision.Dallas Fed president Lorie Logan said she favored "modestly higher" rates.And com…
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