With the markets having long since discounted that the ECB will be on hold at the July meeting, all eyes were on her press conference Christine Lagarde and whether it will want to give a clear signal for the next steps in the field of monetary policy.

In the end, the president of the ECB, who has to face a battle between “hawks” and “doves” within the governing board, kept her cards closed, saying that all possibilities are open for what will happen with the interest rates in September, following today’s decision to keep interest rates unchanged. The deposit rate is thus kept at 3.75%.

In the foreground are fears about growth

The ECB last month cut interest rates from historically high levels, despite the fact that the inflation still far from the 2% target (although it has scaled back considerably) as it feared a strong blow to development.

Many expected the next cut to come in September. Lagarde acknowledged that risks to growth ‘are now to the downside’, abandoning its hitherto “balanced risks in the short term” phraseology. This could be an indication that the central bank is indeed aiming for further easing of monetary policy to support economic activity.

“A weaker global economy or an escalation of trade tensions between major economies could act as a drag on Eurozone growth,” he warned, adding that high interest rates were likely to have a stronger impact on the economy than expected.

But a reduction in September is not certain

Nevertheless, he noted that the ECB should have more macroeconomic data available to decide its next steps. “So the question of September and what we will do in September is absolutely open,” he said, characteristically.

Markets are betting on two more rate cuts by the end of the year – regardless of whether we get a move in September. And they see 5 more cuts (at least) through 2025 – something central bank officials, even those who are not fans of easing, have virtually never publicly disputed.

Although investors would like a clearer position today from Lagarde, there is a reason why Lagarde is avoiding opening her cards. In the very recent past the ECB, which sets monetary policy for the 20 euro countries, has been “burned” by its tendency to be very specific about what it will do.

It had pledged to cut in June several months ago, so it cannot back down, even though the data at the time made many economists question the logic of easing. Regardless of what the data showed, if the promised reduction didn’t come, the turmoil in the markets would be intense.

What goes on the scale

We should not forget that the next meeting still has almost two months ahead of us. It will take place on September 12, after a summer break. A few days earlier we await crucial data on growth, wages, productivity and inflation. All this will be weighed in the final decision.

Let’s remember that inflation in the Eurozone now moves to 2.5%but the appreciations in the service sector continue at rates above 4%, which worries central bankers.

The prediction of the Bank of Greece

Let’s remember that the Greek central banker, Yiannis Stournaras, has been in favor of the need to lower interest rates.

In the “inflation watch”, the BoE is “betting” on a new reduction in interest rates in September, identifying the chances of such a move at 79%.

And the reaction of the markets

Neither the ECB’s decision nor what Lagarde said seemed to have much of an impact on markets. The euro continued to fall 0.5% to $1.09208, the same as before the central bank chief’s press conference, while stocks remained on a slight upward trajectory.

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