Economy
ECB, BoE keep rates steady with another knife-edge vote in London
Both the European Central Bank (ECB) and the Bank of England (BoE) kept their interest rate policy unchanged on Thursday, as expected, despite inflation being largely under control in the eurozone area, while the vote in London was once again divided.
BoE said its main interest rate is unchanged at 3.75%, as inflation remains above target and economic growth is showing signs of picking up.
The decision was widely anticipated in financial markets, but the split on the nine-member rate-setting panel was much closer than expected. Five members of the Monetary Policy Committee (MPC) opted to keep rates unchanged, while four voted for a quarter-point cut.
The central bank, which sets interest rates for the whole of the U.K., has been steadily reducing interest rates over the past 18 months, more often than not every three months. It last cut its key rate in December and indicated that further reductions are likely this year.
At that meeting, the policymakers were also split in the vote, which ended 5-4 in favor of the cut.
Economic forecasts accompanying the decision reinforced the view that further rate cuts are in the offing, as the bank is predicting that inflation will fall back to its 2% target in the coming months. It currently stands at 3.4%.
“We now think that inflation will fall back to around 2% by the spring,” said BoE Bank Governor Andrew Bailey. “That’s good news. We need to make sure that inflation stays there, so we’ve held rates unchanged at 3.75% today. All going well, there should be scope for some further reduction in Bank Rate this year.”
Britain’s Labour government, which has lost significant support since it won the general election in 2024, partly because of the economy, is counting on inflation falling sharply this year, which would allow the central bank to further reduce borrowing costs.
Lower interest rates help spur economic growth by reducing borrowing costs, which can lead to increased spending by consumers and boost investment by businesses. But that can also fuel higher prices.
Central bankers have to weigh those competing forces, trying to prevent inflation from eroding the value of earnings and savings without putting an unnecessary brake on economic growth.
ECB stays on 2%
Meanwhile, later on Thursday, the ECB also kept interest rates unchanged, shrugging off a dip in inflation while continuing to warn about an uncertain geopolitical environment.
The ECB left the rate it pays on bank deposits at 2%, where it has been since June, and reaffirmed that it expects inflation to stabilize at its goal, which is also 2%.
“(The ECB’s) updated assessment reconfirms that inflation should stabilize at its 2% target in the medium term,” the eurozone’s central bank said in a press release.
The bank said the economy remained “resilient in a challenging global environment,” highlighting low unemployment, solid private sector balance sheets and the gradual rollout of public spending on defence and infrastructure.
But it repeated its long-standing warning about an uncertain outlook, “owing particularly to ongoing global trade policy uncertainty and geopolitical tensions.”
Price growth in the 21 countries that share the euro slipped to 1.7% last month, its lowest level since September 2024, and is expected to stay slightly below the ECB’s target for at least a year.
The eurozone economy has nevertheless been picking up pace, with consumption and investments kicking into higher gear in the last three months of 2025.
But last week’s tumble in the U.S. dollar, volatility in commodity markets, the Trump administration’s war of words over Greenland and its pressure on the Federal Reserve (Fed) to cut rates are some of the reminders that the situation could quickly change.
With Thursday’s decision, the interest rates that banks pay to borrow at the ECB’s weekly and daily auctions were left unchanged at 2.15% and 2.40%, respectively.
Russia will see revenue from its biggest single oil tax double to $9 billion in April due to the energy crisis triggered by U.S. and Israeli strikes on Iran, calculations showed Thursday.
The Reuters calculation provides some of the first concrete evidence of a windfall for Russia, the world’s second-largest oil exporter, from the war. Oil traders say the conflict has triggered the most serious energy crisis in recent history.
Iran effectively shut the Strait of Hormuz – a route for about a fifth of global oil and liquefied natural gas flows – after U.S. and Israeli airstrikes on Iran at the end of February, sending Brent futures shooting well past $100 per barrel.
Russia’s main revenue from its vast oil and gas industry is based on production. Export duty on crude oil was nullified at the start of 2024 as part of a wider “tax maneuver,” a yearslong reform of the industry.
According to Reuters calculations based on preliminary production data and oil prices, Russia’s mineral extraction tax on oil output will increase in April to around 700 billion rubles ($9 billion) from 327 billion rubles in March. The revenue is up by about 10% from April last year.
For the whole of 2026, Russia has budgeted for 7.9 trillion rubles from the mineral extraction tax.
Russian energy in demand
The average price of Russia’s Urals crude, used for taxation, jumped to $77 per barrel in March, its highest since October 2023, according to Economy Ministry data.
That was up 73% from February’s $44.59 per barrel and above the $59 level assumed in this year’s state budget. The Kremlin said Tuesday there were a huge number of requests for Russian energy from a range of places amid a grave global energy crisis that is shaking the foundations of the oil and gas markets.
Still, there are limits on the windfall, and economists inside Russia have repeatedly cautioned that 2026 could be a tough year.
Russia ran a budget deficit of 4.58 trillion rubles, or 1.9% of gross domestic product, in the first quarter of 2026, the Finance Ministry said Wednesday. Additionally, Ukrainian attacks on Russian energy infrastructure aimed at crippling Moscow’s finances have contributed to lower earnings and threaten oil production cuts.
The size of the windfall for Russia will ultimately depend on how long the Iran crisis lasts.
The International Monetary Fund expects near-term demand for its financial support to rise to between $20 billion and $50 billion as a result of spillovers from the war in the Middle East, its chief Kristalina Georgieva said on Thursday.
Georgieva said the now-paused war was testing the global economy, with a 13% cut in the daily flow of the world’s oil and a 20% cut in liquefied natural gas triggering a supply shock that had sent energy prices soaring, while disrupting supply chains.
Speaking at the IMF’s headquarters ahead of next week’s meetings of the IMF and World Bank, Georgieva said the war had prompted the Fund to cut its global growth forecast.
“Had it not been for this shock, we would have been upgrading global growth,” Georgieva said, citing momentum from strong investments in technology and supportive financial conditions. “But now, even in our most hopeful scenario, it involves a downgrade of growth.”
U.S. President Donald Trump on Tuesday announced a two-week cease-fire with Iran, but Israel’s continued bombardment of Lebanon threatens to derail talks to forge a permanent peace.
Georgieva said the war posed significant but differentiated risks to IMF members, with net oil importers – 80% of countries – affected by rising prices and supply shortages, even as major oil exporters and non-oil economies in the region had been disproportionately hit.
“Even in a best case, there will be no neat and clean return to the status quo ante,” Georgieva said. Qatar’s Ras Laffan complex, which produces 93% of the Gulf’s LNG, for instance, had been shut since March 2 and could take three to five years to return to full capacity.
“The fact is, we don’t truly know what the future holds for transits through the Strait of Hormuz, or for that matter, for the recovery of regional air traffic,” she added, flanked by graphics showing the dramatic plunge in air and ship traffic over the last six weeks. “What we do know is that growth will be slower – even if the new peace is durable.”
The conflict, which began on Feb. 28, would have ripple effects for some time, Georgieva said, including oil refinery shutdowns and refined product shortages that were disrupting transportation, tourism and trade.
Another 45 million people would face food insecurity, bringing the total number of people in hunger to over 360 million. Supply chain disruptions would also continue, given industrial dependencies on inputs such as sulphur, helium for chip-making and naphtha for plastics.
Growth forecast downgraded
The IMF will release a range of scenarios in its World Economic Outlook next week, going from a relatively swift normalization to a scenario that saw oil and gas prices remaining much higher for much longer, Georgieva said.
Even the most hopeful scenario, she said, involved a growth downgrade due to infrastructure damage, supply disruptions, losses of confidence and other scarring effects.
In January, the IMF had forecast global growth of 3.3% in 2026 and 3.2% in 2027. It was not immediately clear how much of a downgrade the IMF would announce next week.
Georgieva told Reuters on Monday that inflation forecasts would also be increased. Next week’s meetings, which will bring together thousands of finance officials from all over the world, will focus on how to weather the shock of the war and how the IMF can help countries in need, Georgieva said.
She said the IMF was well-resourced and could scale up balance of payments support through existing programs, and additional countries were expected to request aid. She did not identify any specific countries seeking help.
The expected surge in funding requests comes on top of $140 billion in active programs before the war, an IMF official said. Including credit outstanding and lending already in the pipeline, the IMF’s total commitments amount to $245 billion.
Between May 2024 and March 2025, the IMF approved over $36 billion in new lending, according to a study by Boston University.
Georgieva warned that the energy supply shock was already driving up short-run inflation expectations, although longer-run expectations had not budged.
Financial conditions had already tightened, but in an orderly manner, and some easing was now evident.
The broader impact would depend on whether the ceasefire held and resulted in a lasting peace, and how much damage the war left in its wake, Georgieva said.
Countries should not go it alone
Georgieva said a demand adjustment was unavoidable, but cautioned countries against adopting export controls, price controls and other measures that could further upset global conditions.
“I appeal to all countries to reject go-it-alone actions,” she said. “Don’t pour gasoline on the fire.” Georgieva said there was value in watching and waiting, but central banks should “step in firmly with rate hikes” if inflation expectations threatened to break anchor and trigger an inflationary spiral. But she warned against premature moves that could throw “cold water on growth.”
She noted that many countries were putting in place conservation measures, including putting limits on private vehicle use and promoting remote work. Most countries had avoided untargeted tax cuts or energy subsidies, and the IMF was working actively with countries to ensure any measures remained temporary.
Adding deficit-funded stimulus now would increase the burden on monetary policy and amplify the rise in benchmark yield curves, further driving up the cost of debt.
Public debt was generally much higher than 20 years ago, Georgieva said, urging countries to move decisively to rebuild their financial buffers after this shock, after years of failing to do so. Even before the war, global public debt was projected to rise to about 100% of gross domestic product by 2029, its highest level since 1948.
National flag carrier Turkish Airlines (THY) on Thursday announced a new chair of the board and a new chief executive.
Ahmet Olmuştur has been named the new CEO of the company, replacing Bilal Ekşi, the statement said.
Both Bolat and Ekşi are said to retire.
Şeker has been serving as the chief financial officer since 2016, while Olmuştur has been serving as the chief commercial officer of the carrier.
Turkish Airlines also said Metin Gülşen had been appointed as the chief financial officer and Harun Baştürk as chief commercial officer.
The announcement came after separate data on Thursday showed THY’s passenger count rose 16% year-over-year in March to 7.2 million.
The January-March figure jumped 12.7% from a year ago to 21.3 million.
Its occupancy rate rose by 6.1 points to 83.6%, while the first-quarter rate marked a 2.9-point increase to 83.5%.
The European Bank for Reconstruction and Development (EBRD) on Thursday unveiled 5 billion euros ($5.9 billion) to help shore up economies hit by the fallout of the Iran war.
In a statement, the EBRD said it will “deploy EUR5 billion in 2026 in economies impacted by Middle East conflict.”
The funds would be focused on Iraq, Jordan, Lebanon, the West Bank and Gaza “and affected neighboring economies,” including Egypt, Türkiye, Armenia and Azerbaijan, the bank said.
“The economic and social impact of the conflict is already being felt across many of the bank’s economies in the form of disrupted trade routes, energy and commodity shocks, weakened investor confidence and broader costs to the population,” it added.
Established in 1991 to help former Soviet bloc nations embrace free-market economies, the bank later extended its reach to the Middle East and Africa.
“In a time of rising uncertainty, we are stepping up where others may pull back,” said EBRD President Odile Renaud-Basso.
“We are here to support economies, clients and people in our countries of operation in tough times,” she added.
The bank said “the volume of conflict response investment will be demand driven due to the fast-changing nature of the situation.”
The funds will provide immediate relief “by supporting economic activity” and “fostering financial sector stabilization.”
EBRD will aim to strengthen energy security and aid state-owned enterprises to “ensure the uninterrupted provision of essential goods and services.”
On Thursday, it had approved “a project to support Lebanon’s retail chain,” it said, adding it also aimed to safeguard access to jobs, finance and essential services.
The impact of the conflict in the Middle East on the Turkish economy may be temporary and reversible if the recent cease-fire holds, and authorities are ready with a different set of tools if the shock persists, Treasury and Finance Minister Mehmet Şimşek said Thursday.
In a live interview, Şimşek said authorities are prepared with a new response beyond steps already taken if the newly agreed U.S.-Iran cease-fire does not hold. He also pointed to the importance of measures being taken, as he touted Ankara’s capacity to tackle shocks.
“We have a good capacity to manage shocks,” the minister told Bloomberg HT broadcaster, as he recalled trade wars, issues such as drought and frost and political events last year.
He did not detail the potential response but said authorities’ “main scenario” was for a month-long war, adding that a three-month conflict would be bad.
“The macroeconomic fundamentals of emerging economies are actually strong. We saw this in Türkiye as well. Risk pricing in Türkiye dropped dramatically yesterday,” he said, referring to the fall in risk premiums in response to the two-week cease-fire agreed upon.
“The likelihood of a turnaround in risk appetite is quite high,” he added.
This week’s cease-fire has mostly halted the more than five-week war that gripped the Middle East and sent energy prices soaring, although Israel bombed more targets in Lebanon on Thursday, potentially jeopardizing the deal.
Answering questions in the interview, Şimşek described the shocks from the war as the biggest since World War II, referring particularly to disruptions related to energy supplies.
“Reaching a cease-fire is welcome, but normalization will take months at best,” he suggested.
He also drew attention to the risk of global inflation, even stagflation and recession.
“There is a much bigger shock than those experienced in the 1970s. If high energy prices remain a concern, there is a risk of a global recession,” he noted.
He also highlighted that the continuation of the cease-fire and the reconstruction of supply chains are crucial.
“The oil shock – it reduces growth in many countries, there is a cost dimension. … There are negative effects on growth. It triggers fund outflows. If this shock continues, there is a high probability of inflation, growth … stagflation, and a risk of recession,” he explained.
Şimşek also said the central bank’s reserves had fallen by about $48.7 billion since the war began and that some $162 billion remained. He also conveyed the expectations for reserves to rebound.
“We are better off than in the past in terms of reserve adequacy, close to the IMF’s indicator. There is currently no problem with reserves; our reserves are strong. We are also in surplus in net reserves, excluding swaps,” he said.
Comparing Türkiye with other stock markets, including those far away from the region, Şimşek said that Turkish stock markets “have proven resilient” in the face of declines. “This means that Türkiye is performing better than other developing countries,” he suggested.
Disinflation priority
Among others, the minister emphasized that the government remains committed to its goal of disinflation and lowering prices, also conveying that they found certain assessments for inflation heading towards 30% as “exaggerated.”
“The core of our program is combating the high cost of living. The sliding scale adjustment system is one example of this,” he said, referring to a special system introduced to curb the impact of higher fuel prices on consumers.
He also dismissed the revision of the government’s targets, adding: “We can’t say, ‘Let’s publish a new Medium-Term Program.’ We don’t see such a need.”
Similarly, he also said there is some deterioration in growth expectations and expectations related to the current account balance. He also noted that, besides energy, Türkiye has trade and tourism relations with the conflict-impacted region.
The minister also pointed to the potential of Türkiye emerging as a supplier in the region with the disruption of flows through the Strait of Hormuz.
“What’s important for us is to maintain the general outline of the program; there may be deviations from the targets, let’s be realistic, but we will ensure that it converges towards the targets,” he said.
The International Monetary Fund (IMF) greenlighted $700 million more in loans for Sri Lanka on Thursday, while urging Colombo to speed up reforms to guard its post-2022 economic recovery and address shocks from the Middle East crisis.
The fund’s mission approved the latest tranche of its four-year $2.9 billion bailout, provided officials restore cost recovery in energy pricing, among other conditions.
The government has said it will spend nearly $200 million on fuel subsidies after an energy crunch caused by the Iran war forced it to raise retail prices by a third, in line with global trends.
The IMF is opposed to general energy subsidies and wants Colombo to ensure cost recovery in electricity prices, which are subsidised for smaller consumers.
“Sri Lanka is significantly exposed to the Middle East conflict, which has heightened energy prices, disrupted a key air hub for tourists, and affected Sri Lankans working in the region,” the IMF said in a statement.
It emphasized the “urgency of accelerating reform momentum to safeguard macroeconomic stability.”
Colombo had been on the verge of drawing an IMF instalment of $340 million when it was hit in November by Cyclone Ditwah, the island’s worst natural disaster in two decades that killed at least 641 people and made thousands homeless.
The World Bank estimated infrastructure damage at $4.1 billion, and the government requested that the IMF give it a $206 million emergency loan for disaster relief instead.
Sri Lanka’s economy suffered its worst recession in 2022, contracting 7.3%, when then-president Gotabaya Rajapaksa resigned after months of street protests.
The leftist administration of President Anura Kumara Dissanayake, who came to power in late 2024, has retained many of the austerity measures and high taxes introduced by his predecessor.
AK Party Spokesperson Çelik: The important thing is to achieve permanent peace
DMM denied the claim that ‘chemical spraying was carried out by planes’
BREAKING NEWS | Minister of Foreign Affairs Hakan Fidan: We welcome the ceasefire
AK Party Spokesperson Çelik: The important thing is to achieve permanent peace
DMM denied the claim that ‘chemical spraying was carried out by planes’
BREAKING NEWS | Minister of Foreign Affairs Hakan Fidan: We welcome the ceasefire
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