ECB Leaves Rates Unchanged, No “Set” Path Forward

The European Central Bank (ECB) has decided to leave rates unchanged this month after the decision to cut rates at its June meeting. So, the cost of money remains at 4.25%, and President Christine Lagarde is leaving open the possibility of a rate cut at the end of the summer. “But we have no specific path.”

“We are determined to ensure that inflation returns to our medium-term target of 2% in a timely manner,” commented Christine Lagarde. “We will keep prime rates at a fairly restrictive level for as long as necessary to achieve that goal. To determine the appropriate level and duration of restrictions, we will continue to follow the data-driven approach where decisions are made at each meeting on a case-by-case basis.”

Therefore, as usual, following the unanimous decision on the July halt, central bank managers will base their assessments on the inflation outlook, with regard to the generated economic and financial data, the evolution of core inflation, and the intensity of monetary policy transmission. The ECB is making it clear that it does not intend to “tie itself to a particular rate trajectory.”

Nevertheless, we are prepared to adapt all instruments within our mandate to ensure that inflation returns to our medium-term objective and to preserve the orderly functioning of the transmission mechanism of monetary policy.

Thus, interest rates remain as follows: principal refinancing at 4.25%, deposits at 3.75%, and margin loans at 4.50%.