ECB Meeting Today: Interest Rates Held Steady at 4.25%. No Preview on September from Lagarde

BCE Meeting: Rates Unchanged and Caution on Inflation

The ECB meeting held on July 18 has confirmed the forecasts with interest rates remaining unchanged.
The cautious tone on inflation – which led the board to keep the cost of money steady – is mainly reflected in this statement:

“Domestic price pressures remain high, services inflation is elevated, and overall inflation is likely to remain above target for much of the next year.”

It has been reiterated that each decision will be based on data analyzed meeting by meeting, and the ECB does not commit in advance to any monetary policy move.

What Lagarde Said during the Press Conference?

The July 18 meeting has already been dubbed by some analysts as a non-event.
Lagarde did not reveal any concrete details about future moves, emphasizing that all board members have agreed to solely rely on a data-driven approach, meeting after meeting.
The possibility of a rate cut in September has been described as a “completely open” issue, indicating that everything is still on the table with no preemptive announcements.

Lagarde stated that the central bank expects inflation levels to fluctuate throughout 2024, but overall they are projected to decrease in the second half of the year due to declining labor costs, the impact of monetary policy, and the dampening effect of price shocks.

Specifically, the governor explained: “Wages continue to grow at a high rate, offsetting the period of high inflation in the past.
Higher nominal wages, coupled with weak productivity, have contributed to an increase in labor costs, although it has slowed down a bit in the first quarter of this year.”

Expectations for 2025 and Beyond

2025 is likely to be the year when the ECB expects a more decisive approach towards the 2% target.
The question of another rate cut in September remains unresolved.

Highlights of the Conference

As widely expected, the ECB kept interest rates unchanged.
Lagarde’s refusal to provide hints on which data will be crucial to determine another rate cut implies a thorough examination and an “intense” summer ahead.

Lagarde remains optimistic about wages and the ECB’s forecasts (with decreasing wages and inflation).
Although she acknowledges the potential for errors, she refuses to entertain the notion that *all* ECB indicators and assessments are incorrect.

The decision for September’s meeting remains entirely open, highlighting the ECB’s flexibility to adapt to evolving economic conditions.

In conclusion, Lagarde stressed the ECB’s commitment to data dependency and the maintenance of restrictive interest rates until deemed necessary.
The bank stands non-committal on any predetermined rate path.