ECB meeting, pause on increases. Rates stuck at 4.50%. What did Lagarde say?

The ECB meeting on Thursday 26 October decided to take a break on the rate hike, which therefore remains stable at 4.50%.
As widely expected, the board meeting in Athens decided not to continue with the aggressive policy which had so far seen the cost of money increase relentlessly from 2022.
The context is very complex at a global level and even more so for the Eurozone.
The war in Israel is the new, unforeseen factor that has suddenly added to the already known reasons for concern for the European region, focused above all on the arrival of a recession.
In the official document on today's monetary policy decision, the ECB reiterated that inflation “will remain too high for too long and pressures on domestic prices remain strong.
At the same time, inflation fell significantly in September, partly due to strong base effects, and most measures of underlying inflation continued to ease.” We then read in the statement that members for now evaluate the current levels of rates, if left like this for a sufficiently long period, capable of bringing inflation to 2%.
This means that the “higher, longer” strategy could be the dominant one in the coming months.
On the budget reduction front, no changes have been announced at this time.
The ECB intends, as part of the PEPP, “to reinvest the capital repaid on maturing securities purchased under the program at least until the end of 2024”.
There had been speculation about the possibility of bringing this date forward, but it has not been made official.
There was no mention of this tool in the meeting.
Lagarde's press conference ended with the governor reiterating that it is premature to talk about rate cuts and that further increases are not excluded.
read also Mortgages, what happens to the installment with rates stuck at 4.50% ECB, meeting 26 October: rates unchanged.
What does it mean? No particular surprises or shocks on the markets following the ECB meeting.
Lagarde and the members of the board, in fact, did not disappoint expectations by deciding to keep interest rates unchanged.
Lagarde explained that this decision, far from being a "non-action", was taken considering that in September there were signs of a general easing of prices.
Maximum attention, however, on inflation which is still expected to be high and for too long.
This means that nothing is excluded in the next meetings, which will always be dependent on data and verification of the transmission of monetary policy.
Lagarde repeatedly reminded the press conference that it is premature to talk about rate cuts and that this pause does not mean that other increases can be decided.
The geopolitical factor, obviously, is of particular concern in terms of energy and food prices.
Furthermore, Eurozone growth is still seen as weak.
“The economy will probably remain weak for the rest of the year,” Lagarde said.
“But as inflation falls further, real household incomes recover and demand for euro area exports increases, the economy is expected to strengthen in the coming years.” Record-high borrowing costs are starting to work their way through the economy and further hits are yet to emerge, according to Lagarde.
ECB in meeting: rates unchanged, how Lagarde's conference went The ECB decision in the October meeting did not surprise expectations: a pause in increases in the cost of money, with rates remaining firm after 10 consecutive increases.
All the details recorded live in Lagarde's press conference.
3.39pm Once the conference is over, Lagarde ends the press conference.
Next meeting December 14th.
3.35pm Steady rates, but not inaction Lagarde underlines that the decision to remain stationary with rates is not a symptom of inaction, but of very specific action.
3.23pm Stop rising rates? Lagarde refuses to commit that the ECB will never raise rates again.
3.17pm Monetary policy and spreads When asked about the effect of high rates on the BTP-Bund spread, and therefore on the Italian bond market, Lagarde responds by recalling that the ECB has the task of fighting inflation with interest rates.
Furthermore, it must check that the policy is transmitted regularly in all countries and, if necessary, has the tools to intervene if there are fragmentations.
3.14pm Insert title Insert text here 3.11pm Impact of monetary policy Lagarde says that the ECB's policy already has an impact.
“What we are seeing is a very strong transmission of our monetary policy particularly into the banking system.” High rates will continue to impact the real economy.
15:07 ECB dependent on data Lagarde stresses that decisions will be taken in response to inflation data and the impact of the ECB's action so far.
No discussion on rate cut in the meeting.
15:05 PEPP PEPP was not discussed in the meeting.
Therefore, there is no talk of modifying the ECB budget.
No acceleration in budget reduction.
15:03 Geopolitics War in Ukraine and conflict following the Hamas attack on Israel are geopolitical risks under observation and may have an impact.
3.02pm Questions begin Lagarde continues the conference with answers to questions from journalists in Athens.
15:00 Effects of high rates Lagarde says that financing has become more expensive.
Sharp decline in credit demand highlighted.
2.58pm Risks for the Eurozone Lagarde underlines that the risks for growth are oriented downwards and geopolitics could increase the risks of inflation, with energy and food prices that can rise in the context of war.
2.57pm Insert title Insert text here 2.53pm Inflation in the Eurozone Lagarde recalls that in September the decline in inflation was generalized.
But domestic price pressures remain strong, but moderate.
Longer-term inflation expectations are around 2%.
2.50pm Conference begins Lagarde began speaking at the press conference.
2.40pm Euro dollar The EUR/USD pair is still weak at 1.0546 with a decline of 0.19%.
2.22pm Monetary policy decision The Governing Council decided today to keep the ECB's three key interest rates unchanged.
The information received essentially confirmed its previous assessment of the medium-term inflation outlook.
Inflation is expected to remain too high for too long and domestic price pressures remain strong.
At the same time, inflation fell significantly in September, partly due to strong base effects, and most measures of underlying inflation continued to ease.
Past interest rate increases decided by the Governing Council continue to have a strong impact on financing conditions.
This is increasingly dampening demand and therefore helping to push inflation down.
The Governing Council is determined to ensure that inflation returns to its medium-term target of 2% in a timely manner.
Based on its current assessment, the Governing Council considers that the ECB's key interest rates are at levels that, if maintained for a sufficiently long period, will make a substantial contribution to achieving this objective.
Future decisions by the Governing Council will ensure that its policy rates are set at sufficiently restrictive levels for as long as necessary.
The Governing Council will continue to follow a data-dependent approach to determining the appropriate level and duration of the restriction.
In particular, the Governing Council's interest rate decisions will be based on an assessment of the inflation outlook in light of incoming economic and financial data, underlying inflation dynamics and the transmission strength of monetary policy.
ECB key interest rates The interest rate on the main refinancing operations and the interest rates on the marginal lending facility and deposits will remain unchanged at 4.50%, 4.75% and 4.00% respectively.
Asset Purchase Program (APP) and Pandemic Emergency Purchase Program (PEPP) The APP's portfolio is declining at a measured and predictable pace, as the Eurosystem no longer reinvests the principal repaid on maturing securities.
Regarding the PEPP, the Governing Council intends to reinvest the principal repayments on maturing securities purchased under the program until at least the end of 2024.
In any case, the future roll-off of the PEPP portfolio will be managed in a way that avoids interference with an adequate monetary policy orientation.
The Governing Council will continue to apply flexibility in reinvesting maturing repayments into the PEPP portfolio, in order to counter risks to the monetary policy transmission mechanism related to the pandemic.
Refinancing operations While banks repay amounts borrowed under targeted longer-term refinancing operations, the Governing Council will regularly assess how targeted lending operations and their ongoing repayment contribute to its policy stance monetary.
*** The Governing Council stands ready to adjust all its tools within its mandate to ensure that inflation returns to its target of 2% over the medium term and to preserve the smooth functioning of monetary policy transmission.
Furthermore, the transmission protection tool is available to counter unjustified and disorderly market dynamics that pose a serious threat to the transmission of monetary policy across euro area countries, thus enabling the Governing Council to better implement effective in its price stability mandate.
2.15pm Rates on hold The ECB has decided to keep rates on hold: interest rate at 4.50%; deposit rate at 4.00% and refinancing operations at 4.75% 14:06 Waiting for ATA rates for today's decision on rates to be revealed: will there be a break? 12.45pm Europe remains negative European indices continue to trade below parity at the end of the morning.
The Ftse Mib is down by 0.71%; the French Cac by 0.63% and the German Dax by 1.36%.
11:15 Btp-Bund Spread The Btp-Bund spread is at 202 points, down from the opening at 208.
However, the differential is also heating up in view of the ECB meeting and possible news on the end of bond purchases by of the Eurotower.
10:06 Euro weak The EUR/USD pair is weak and falls to 1.0551.
The exchange rate remains on the defensive at weekly lows as traders await the European Central Bank's (ECB) interest rate decision.
The expected ECB pause and negative mood-driven demand for US dollars undermine the pair.
09:15 European stock markets in the red Negative start to the day in Europe.
The main stock indices in the region start with clear losses: the Milanese Ftse Mib is down by 1.08%; the French Cac of 1.16%; the German Dax by 1.38%.