ECB: September cut is an 'open question'

The European Central Bank left the deposit rate unchanged at 3.75 per cent and the reference rate at 4.25 per cent as expected in the run-up. The ECB had cut rates by a quarter of a percentage point on 6 June. The decision was unanimous, as was the decision not to give any indication of future moves.

According to many analysts, the next cut could take place in September, coinciding with new macroeconomic projections and other inflation data. There is nothing in the official statement to suggest that these expectations are inappropriate: the European Central Bank emphasises that the rise in inflation in May is linked to 'isolated' factors, even though most measures of underlying inflation fell or remained stable in June.

The pressure from higher wages also continues to be absorbed by profits, which fell in the first quarter. Wage negotiations - President Christine Lagarde explained at a press conference - will see their maximum impact in 2025, but by 2026 the wage dynamic is 'compatible' with the monetary policy target. The room for further cuts, therefore, is still there.

However, a rapid reduction in the cost of official credit in the very short term cannot yet be envisaged: 'Domestic price pressures remain high,' the statement continued, 'services inflation is elevated and headline inflation is likely to remain above target through much of next year,' especially due to 'base effects' related to energy, to fall - Lagarde said - towards the 2 per cent target in the second half of 2025. Financing conditions - she added - remain tight and the economy would grow in the second quarter at the same pace as in the first quarter.

The ECB will therefore continue to maintain a 'data-driven approach whereby decisions are determined from time to time at each meeting'. There is no commitment, but also no indication, on the future path of rates. 'The September decision is totally open,' Lagarde added, reminding that projections will obviously be central.