A message about the future direction of interest rates is expected to be sent during today’s meeting by the European Central Bank (ECB), with markets and analysts estimating that there will be no change. This would signal a temporary pause in the interest rate reduction process that began in June 2024.
It’s worth noting that, according to a recent Reuters poll of economists, all participants predict that interest rates will remain unchanged at the July meeting, while approximately 60% estimate there will be a reduction of 0.25 percentage points in September. According to banking group Citi, all signs point to the European Central Bank leaving interest rates unchanged at its meeting.
“The ECB’s primary objective appears to have been largely achieved”
“A reasonable question is why this is happening? The ECB’s primary objective appears to have been largely achieved (something for which the Governing Council deserves recognition), however there is also a secondary objective, which—in our view—could support further interest rate cuts without jeopardizing the primary objective,” it noted characteristically.
“The fact that this secondary objective appears to be completely ignored sheds useful light on the Governing Council’s reaction function, which we continue to believe will lead to further cuts, but only when the data urgently demands it,” Citi emphasized.
With information from ERT
