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ECB sees inflation on track so far but keeps September move wide open

In Short

ECB stayed on hold today: At today’s meeting the GC unsurprisingly decided to keep its key interest rates unchanged, the deposit rate at 3.75% and the repo rate at 4.25%. It continues with APP non-reinvestments and– as previously an-nounced – does no longer invest maturing securities purchased under the PEPP, reducing corresponding holdings by €7.5 billion per month on average. It intends to fully stop reinvestments at the end of 2024.

Highlights:

  • At today’s meeting the ECB’s Governing Council (GC) unanimously decided to leave its key rates unchanged, in line with expectations. 
  • The GC sees the latest inflation developments as in line with its projections. While the rhetoric on wage growth sounded less concerned than in June the future inflation assessment will also depend on corporate margins and productivity. 
  • In the Q&A President Lagarde pushed against indicating future action. She emphasized that the GC was truly data dependent and that “what we do in September is wide open”. 
  • We continue to look for further 25 bps rate cuts in Sep. and Dec., largely in line with market expectations. Mar-kets were not surprised by today’s decision which had already been telegraphed by GC over the past weeks. 
     

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ECB sees inflation on track so far but keeps September move wide open
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