ECB holds its key rate at 2.25% as it weighs the Hormuz energy shock

The European Central Bank left its key interest rates unchanged on Thursday, 23 July: the deposit facility rate stayed at 2.25%, the main refinancing rate at 2.40% and the marginal lending rate at 2.65%. The move had been widely expected.

In its statement the Governing Council said the outlook for energy prices remains highly volatile and well above pre-conflict levels, adding that uncertainty is high and the full inflationary impact of the energy shock has yet to play out. Euro-area inflation, near 2.8%, is still above the bank's 2% target.

The jump in oil prices amid Strait of Hormuz tensions has led some investors to price in another rate increase at the September meeting. In the same session the euro traded at about 1.1384 against the dollar.