ECB does not change the cost of money, deposit rate remains at 2%

No surprises. The European Central Bank left the deposit rate unchanged at 2% and the refinancing rate at 2.25%, in a unanimous decision. Above all, it seems to want to close the phase of combating high inflation to open another one. "Inflation is currently at our medium-term target of 2 per cent," the official statement immediately informs, and no longer 'around' that level. It is well understood that a one-off, single figure means nothing, but according to the ECB, 'domestic price pressures have continued to ease in the face of a slowdown in wages', which were still growing 'strongly' last month. "We are quite confident," President Christine Lagarde added at a press conference, "that the inflationary shocks of recent years are behind us and that our task now is to look at what is coming. "We have essentially closed the disinflationary cycle," she then concluded.

Rather, the new phase is characterised by a high degree of uncertainty, and in fact the official communiqué is particularly laconic: not only with respect to the June communiqué, which was more articulate because it largely reported the results of the quarterly macroeconomic projections, but also with respect to the 'intermediate' ones, so to speak. The central bank simply states that "thanks in part to the past interest rate cuts decided by the Governing Council, the economy has so far shown good resilience in a difficult global environment", thus indicating that there is no urgent need for monetary intervention. The high uncertainty, with no surprises, is linked to "trade disputes".

At the press conference Lagarde, highlighting the better-than-expected data in the first quarter, explained that 'current and expected rates, a stronger euro and persistent geopolitical uncertainty are making businesses more hesitant to invest; while rising real incomes and strong private sector balance sheets continue to support consumption'. Public investment 'in defence and infrastructure' should also support growth. In essence, she added, Euroland 'is in a good position'.

However, risks to growth remain tilted to the downside, due to trade tensions, but also geopolitical tensions. The outlook for inflation, held back by a stronger euro and tariffs, is also more uncertain. However, there is a risk of fragmentation of global supply chains, also linked to trade tensions, which could push up prices, along with the same investments in defence and infrastructure called for to support growth and 'extreme weather events'. Lagarde recalled that the exchange rate, repeatedly evoked, is not a target for monetary policy but its development will be monitored to assess its effects on inflation. The ECB will not necessarily react, however, to further price cooldowns, which are, she recalled, expected in the projections. 'What is relevant is the medium-term objective' and that short-term and long-term expectations remain anchored.

No indication on the future, not even on the rate cut that the June projections seemed to imply and that the markets expect. The baseline scenario remains the one drawn last month, although discussions on tariffs seem to be distancing themselves from it. The next decisions will continue to be made 'meeting after meeting' and on the basis of data: 'We are well positioned to wait and see' what happens.