European Central Bank officials concluded that even after keeping borrowing costs unchanged at last month's meeting, they must be prepared to respond quickly to the conflict in the Middle East. Meeting minutes from the ECB's March 18–19 gathering indicated that "for the Governing Council, it is essential to keep policy options open for future meetings and to remain flexible and swift to react if the medium-term inflation outlook requires policy action." The decision to hold rates steady at this meeting "should not be interpreted as a weakening of the Governing Council’s readiness to act if necessary." According to the minutes released on Thursday, policymakers also discussed which indicators to focus on when judging whether the surge in energy prices could lead to persistently high inflation. Informed sources said that given the ongoing uncertainty surrounding the conflict involving Iran, the ECB is leaning toward keeping interest rates unchanged this month. The conflict has exerted stronger upward pressure on prices than initially expected. Earlier the same day, Eurostat revised upward the eurozone's March inflation rate to 2.6%. Other key points from the meeting included: On interest rates: By the time of the next monetary policy meeting, the Governing Council will have more information regarding the duration and scale of the conflict, the persistence of its impact on energy prices, possible fiscal support measures, and preliminary data on many key indicators previously discussed. It is crucial to be prepared to act if evidence emerges that, due to increased persistence of the shock or strong indirect and second-round effects, underlying inflation pressures are becoming more broadly embedded in the economy, potentially causing medium-term inflation to deviate significantly from the target. If there is a threat of persistent deviation from the inflation target, policy action must be taken to ensure inflation expectations remain anchored and to prevent cost increases from feeding into selling prices and wages, triggering a wage-price spiral. The monetary policy response will critically depend on the extent to which firms and employees incorporate the initial inflation shock into their pricing and wage-setting behavior.