ECB Leans Toward Rate Hold in April Amid War Uncertainty

European Central Bank policymakers are leaning toward maintaining current interest rates at their April 29-30 meeting, as they await clearer evidence on the economic fallout from the ongoing war in the Middle East, according to several officials speaking on the sidelines of the International Monetary Fund and World Bank spring meetings in Washington.

The conflict, now in its second month, has driven up energy costs and pushed euro zone inflation to 2.5 percent in March, exceeding the ECB's 2 percent target. Policymakers are debating whether this surge risks triggering broader, self-reinforcing price pressures, known as second-round effects, that could embed higher inflation across wages, services, and consumer prices. However, with limited data available ahead of the April decision, officials argue it is premature to tighten policy now.

Estonian central bank governor Madis Muller emphasized the uncertainty surrounding the war's duration. "The duration of the war is the biggest unknown that will drive energy prices and will have broader implications for growth and inflation," he told reporters. Muller noted that while a rate hike in April cannot be entirely ruled out, especially...