The European Central Bank left interest rates unchanged after last month's landmark cut — giving away little on its plans as investors and economists bet on another move in September.
The deposit rate was kept at 3.75% on Thursday — as all 55 economists in a Bloomberg survey predicted. The ECB reiterated that borrowing costs will remain "sufficiently restrictive for as long as necessary" to ensure inflation returns to 2%.
"The incoming information broadly supports the Governing Council's previous assessment of the medium-term inflation outlook," it said in a statement. "At the same time, domestic price pressures are still high, services inflation is elevated and headline inflation is likely to remain above the target well into next year."
Once again, the ECB said it isn't "pre-committing to a particular rate path," while reiterating its "data-dependent and meeting-by-meeting approach."
The euro held onto earlier losses, trading down 0.1% at $1.093. Money markets continue to lean toward two more rate cuts in 2024.
The ECB is weighing whether euro-zone inflation is cooling sufficiently to allow further monetary loosening. Last month saw a small dip to 2.5% from 2.6%, though underlying pressures held firm and the advance in services costs again topped 4%.
President Christine Lagarde has said officials need data to provide more certainty, and that Europe's labor market — which has displayed surprising resilience during two years of economic stagnation — means they can bide their time.
Lagarde will speak to journalists at 2:45 p.m. in Frankfurt and could offer clues what comes next. She may, however, refrain from explicit pointers after officials were deemed to have backed themselves into a corner by signaling June's move so strongly in advance.
While policymakers are more guarded this time around, several have in recent weeks tentatively endorsed one or two more cuts. The expectation is that they'll be ready for the first at the next policy meeting in two months.
By then, they'll have fresh economic forecasts and two more inflation readings, as well as figures on the three elements underpinning their view that price growth will retreat to target in late 2025 — wage gains, corporate profit margins and productivity.
There may also be more clarity on the Federal Reserve's intentions, with markets anticipating a first cut in US borrowing costs the week after the ECB's September meeting.
The ECB's careful approach to unwinding the spate of rate hikes they enacted to tame prices is in line with the recommendations of top global institutions.
The International Monetary Fund warned Tuesday that inflation in many major economies has been receding more slowly than expected, mainly due to sticky services prices — "raising the prospect of higher-for-even-longer interest rates."
The Bank for International Settlements said in June that central banks shouldn't reduce borrowing costs too rapidly, to avoid price growth flaring up again.
Source : Bloomberg
