The European Bank (ECB) on Thursday kept its key interest rates unchanged, despite rising commodity prices and record high inflation.
The bank’s benchmark refinancing rate sits at 0%, while the rate on its marginal lending facility remained unchanged at 0.25%, and the rate on its deposit facility was kept at minus 0.5%.
"Russia’s aggression in Ukraine is causing enormous suffering. It is also affecting the economy, in Europe and beyond. The conflict and the associated uncertainty are weighing heavily on the confidence of businesses and consumers," the ECB said in a statement.
"Trade disruptions are leading to new shortages of materials and inputs. Surging energy and commodity prices are reducing demand and holding back production," it added.
Euro area annual inflation climbed to 7.5% in March, up from 5.9% in February, according to the EU's statistical office Eurostat.
While energy has the highest gain in March with a 44.7% annual increase, it is followed by unprocessed food with a 7.8% gain, according to Eurostat estimates.
"How the economy develops will crucially depend on how the conflict evolves, on the impact of current sanctions and on possible further measures. At the same time, economic activity is still being supported by the reopening of the economy after the crisis phase of the pandemic," the ECB said.
The bank noted that inflation has increased significantly and will remain high over the coming months, mainly because of the sharp rise in energy costs.
The ECB said it expects net asset purchases under its asset purchase program (APP) should be concluded in the third quarter.