By Marta Vilar – FRANKFURT (Econostream) – The European Central Bank’s Governing Council on Thursday left its key interest rates unchanged, while warning that risks arising from the energy shock are increasing on both sides: inflation could rise more than expected, and economic growth could weaken further.

The three ECB interest rates will stay at 2.0% for the deposit facility, at 2.15% for the main refinancing operations and at 2.40% for the marginal lending facility.

In its statement, the Governing Council said that incoming data had been “broadly consistent” with its previous assessment of the inflation outlook, adding that “the upside risks to inflation and the downside risks to growth have intensified.”

“The implications of the war for medium-term inflation and economic activity will depend on the intensity and duration of the energy price shock and the scale of its indirect and second-round effects,” the document said.

The document noted that the longer the war continues and energy prices stay elevated, the greater the likely impact on both inflation and overall economic activity.

The ECB was “well positioned” to navigate the current uncertainty, the press release said, pointing out that inflation was at 2% before the shock and that the economy has shown resilience in recent quarters.

“Longer-term inflation expectations remain well anchored, although inflation expectations over shorter horizons have moved up significantly,” it said.