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"After today's interest rate decision: 'It's wide open'"

The European Central Bank (ECB) is leaving its key interest rates unchanged, as expected. But what will happen in September, on the other hand? It's wide open, according to ECB President Christine Lagarde.

» Updated: 19 July 2024, 09:33

» Published: 18 July 2024

"After today's interest rate decision: 'It's wide open'"
Photo: Arne Dedert/AP/TT

The European Central Bank (ECB) has left its interest rates unchanged, as expected. But what will happen in September?

It's wide open, according to ECB President Christine Lagarde.

The interest rate decision from the ECB was highly anticipated. After the 0.25 percentage point cut in June, none of Bloomberg's forecasters expected the ECB to make another cut to the deposit rate, which remains at 3.75 percent, the same level as the Swedish Central Bank's interest rate.

Although inflation in the eurozone fell to 2.5 percent in June, there is still uncertainty, according to the ECB, which expects the inflation target not to be reached until well into 2025. The central bank is also raising a warning flag about service sector inflation, which is considered to be still high.

The market is now focusing on whether there will be a new interest rate cut in September. However, Lagarde dodged the question during the subsequent press conference:

It's wide open and depends on the data we will receive until then, she says.

The market does not see it as particularly wide open, with an 80 percent probability of an interest rate cut in September currently expected.

Lagarde acknowledges that the risks to economic growth "are still skewed to the downside". There is also concern that the global economy could develop more weakly if trade tariffs were to be established on a larger scale, which has been in focus recently between the EU and China.

As for what impact it would have if Donald Trump were to win the presidential election in the US, Lagarde does not want to speculate.

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By TTThis article has been altered and translated by Sweden Herald

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