BREAKING: ECB leaves rates unchanged 📌

• ECB Deposit Rate Actual 4% (Forecast 4%, Previous 4.00%)
• ECB Interest Rate Actual 4.5% (Forecast 4.5%, Previous 4.50%)

The Governing Council of the European Central Bank (ECB) has decided to maintain its three key interest rates unchanged at 4.50% for main refinancing operations, 4.75% for the marginal lending facility, and 4.00% for the deposit facility.

• Reduction of the PEPP (Pandemic Emergency Purchase Programme) by EUR 7.5 billion in the second half of the year - in line with previous assumptions.
• Market financing conditions are restrictive, and previous rate hikes are affecting demand limitation, pushing inflation downwards.
• Revision of GDP growth for 2024 to 0.6%, with growth of 1.5% in 2025 and 1.6% in 2026.
• Inflation projected at 2.3% in 2024, 2.0% in 2025, and 1.9% in 2026.
• Core inflation expected to be 2.6% in 2024, 2.1% in 2025, and 2.0% in 2026.
• The market is reducing expectations for cuts to 100 basis points in 2024.

Despite easing measures of underlying inflation, domestic price pressures remain due to factors like wage growth. Financing conditions are currently restrictive, and previous interest rate increases continue to suppress demand, contributing to lowering inflation. Growth projections for 2024 have been lowered to 0.6%, with a gradual recovery expected in the following years. 

The statement from the European Central Bank (ECB) largely echoes previous sentiments, despite lower revisions to inflation and economic growth projections. Following these softer economic projections, the EURUSD exchange rate has experienced a slight decline, moving from around 1.0890 to 1.0882. The focus now shifts to ECB President Christine Lagarde for further insights or directions.

Source: xStation 5