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18/07/24
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EUR Slightly Down as ECB Maintains Interest Rates
On Thursday, the euro inched down, and EUR/USD traded at about 1.0919, down 0.18% for the day early in the North American session. The euro hasn’t had a losing day since July 9 and gained 1% during that time.
The European Central Bank kept its key lending rate at 3.75% at the meeting today, after reducing rates by 0.25% in June. The decision to keep rates unchanged was generally expected, especially after the cut in June, and the euro was calm. The markets are focused on ECB President Lagarde’s press conference, looking for clues about rate policy going forward.
The rate statement stated that services inflation was elevated, and headline inflation would likely stay higher than the target well into 2025. The markets weren’t worried by the hawkish comment as the ECB has shown that it was willing to cut rates even when inflation is higher than the 2% level.
The markets have priced in two more 0.25% cuts in Sept. and Dec. ECB policymakers have remained cautious and the rate statement stated that the ECB wasn’t committing to a specific rate path.
ECB officials have repeated that inflation was still high and wage growth, which feeds services inflation, has to come down before the ECB would feel confident in cutting rates again.
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