ECB Press Conference: Lagarde speaks on policy outlook after cutting key rates by 25 bps in June

Christine Lagarde, President of the European Central Bank (ECB), explains the ECB's decision to cut key rates by 25 basis points in June and responds to questions from the press.

Follow our live coverage of the ECB policy announcements and the market reaction.

ECB press conference key quotes

We expect the economy to continue to recover."

"Recovery to be supported by rising real incomes."

"Surveys point to jobs growth in near term."

"Price pressures are gradually diminishing."

"Wages are rising at an elevated pace."

"Staggered nature of wage adjustment process, labour costs will likely fluctuate in near term."

"Forward looking indicators signal moderating wage grwoth."

"Profits are absorbing parts of rise in unit labour cost."

"Inflation to fluctuate around current levels for rest of year."

"Inflation will then decline towards target in the second half of 2025."

"Risks to growth tilted to the downside over medium term."

"Risks to growth balanced in near term."

"Interest rate cut is justified by confidence in the path ahead."

"Robustness of fourth quarter 2025 inflation projection formed basis of rate cut decision."

"Decision and data releases are not perfectly synchronized."

"Not going to tell you until much later in summer if we do something now or at another point in time."

"We will need more data to constantly confirm disinflationary path."

"We're more restrictive in real terms than back in September."

"There will be other bumps on road."

"Some bumps can be anticipated, like base effects."

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This section below was published at 12:15 GMT to cover the European Central Bank's policy announcements and the immediate market reaction. 

The European Central Bank (ECB) announced on Thursday that it lowered key rates by 25 basis points following the June policy meeting, as expected. With this decision, the interest rate on the main refinancing operations, the interest rates on the marginal lending facility and the deposit facility came down to 4.25%, 4.5% and 3.75%, respectively.

Key takeaways from ECB policy statement

"Staff now see headline inflation averaging 2.5% in 2024, 2.2% in 2025 and 1.9% in 2026."

"For inflation excluding energy and food, staff project an average of 2.8% in 2024, 2.2% in 2025 and 2.0% in 2026."

"Will keep policy rates sufficiently restrictive for as long as necessary to achieve this aim."

"Will continue to follow a data-dependent and meeting-by-meeting approach to determining appropriate level and duration of restriction."

"In particular, interest rate decisions will be based on its assessment of inflation outlook in light of incoming economic and financial data, dynamics of underlying inflation and strength of monetary policy transmission."

"ECB today also confirmed that it will reduce Eurosystem’s holdings of securities under Pandemic Emergency Purchase Programme (PEPP) by €7.5 billion per month on average over the second half of the year."

"Modalities for reducing PEPP holdings will be broadly in line with those followed under APP."

"APP and PEPP APP portfolio is declining at a measured and predictable pace, as Eurosystem no longer reinvests principal payments from maturing securities."

"ECB will continue to reinvest, in full, principal payments from maturing securities purchased under PEPP until end of June 2024."

"Domestic price pressures remain strong as wage growth is elevated, and inflation is likely to stay above target well into next year."

"ECB is determined to ensure that inflation returns to its 2% medium-term target in a timely manner."

"Dynamics of underlying inflation and the strength of monetary policy transmission, it is now appropriate to moderate the degree of monetary policy restriction after nine months of holding rates steady."

"The Governing Council is not pre-committing to a particular rate path."

"Inflation outlook has improved markedly."

"Monetary policy has kept financing conditions restrictive."

"By dampening demand and keeping inflation expectations well anchored, this has made a major contribution to bringing inflation back down."

"Decisions will be based on its assessment of the inflation outlook in light of the incoming economic and financial data, dynamics of underlying inflation and strength of monetary policy transmission."

Market reaction to ECB policy announcements

EUR/USD edged slightly higher with the immediate reaction and was last seen trading in positive territory near 1.0900.

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This section below was published at 07:00 GMT as a preview of the European Central Bank's monetary policy announcements. 

• The European Central Bank is set to cut interest rates by 25 bps on Thursday.
• ECB President Christine Lagarde could stick to a data-dependent stance on future rate outlook.
• The Euro’s fate hinges on the ECB’s updated forecasts and Lagarde’s speech. 

The European Central Bank (ECB) is set to announce its first interest rate cut since 2019 on Thursday at 12:15 GMT.

The updated staff economic projections will be published alongside the interest rate announcement. ECB President Christine Lagarde’s press conference will follow at 12:45 GMT.

What to expect from the European Central Bank interest rate decision?

A 25 basis points (bps) reduction to the benchmark Deposit Facility Rate is fully baked in, following the conclusion of the Governing Council’s June monetary policy meeting, which will bring down the borrowing cost from a historic high of 4.0% to 3.75%.

Several ECB policymakers have long promised a rate cut in June. Therefore, the main focus will be on the central bank’s communication on the path forward on interest rates. Market participants will closely scrutinize the language in the policy statement, as well as ECB President Christine Lagarde’s words during the press conference to gauge the scope and timing of the next rate cuts this year.

Although the Eurozone’s inflation has come close to the central bank’s 2.0% target, the sticky services inflation (back above 4.0% annually in May) raised expectations that the ECB won’t embark upon an aggressive easing cycle. Meanwhile, Eurozone annual inflation rose from 2.4% in April to 2.6% in May, beating the forecast for a 2.5% increase.

Further, a strong economic recovery and a tight labor market in the old continent will likely compel the ECB to refrain from committing to additional rate cuts in the meetings beyond June.

Lagarde could, therefore, stick to the Bank’s data-dependent stance and avoid providing any guidance on the policy outlook.

"I think they will be far less prescriptive about what comes next than they have been around the June meeting," said BNP Paribas' chief Europe economist Paul Hollingsworth in a research note.

Markets are expecting fewer than 60 bps of cuts this year, implying two moves and less than a 50% chance of a third one. This is down from three rate cuts projected when the ECB last met in April and at least five rate cuts expected in 2024 in January, according to Reuters.

How could the ECB meeting impact EUR/USD?

Heading into the ECB showdown, the Euro is consolidating below a three-month top of 1.0916. The US Dollar (USD) struggles to sustain the upside momentum amid the revival of bets for a Federal Reserve (Fed) interest rate cut in September after weak US ISM Manufacturing PMI data for May.

ECB President Christine Lagarde’s non-commital stance on the timing of the next rate cut could add extra legs to the EUR/USD recovery, as it would imply that the Bank could maintain rates higher for longer amid the persistence of inflation.

On the other hand, if Lagarde dismisses concerns about sticky inflation, it could be read as a bit dovish by market participants, eventually rendering negative for the EUR/USD pair.

Dhwani Mehta, FXStreet’s Senior Analyst, offers a brief technical outlook for trading the Euro on the ECB policy announcements: “EUR/USD extends its battle at around the stiff resistance near 1.0890, suggesting that buyers are gathering strength. The 14-day Relative Strength Index (RSI) holds strongly above the midline, near 60, adding credence to the pair’s upside potential.”

“Acceptance above the 1.0950 level is critical to unleashing further upside towards the 1.1000 psychological level. EUR buyers will then aim for the static resistance at 1.1050. Conversely, the initial demand area is seen around the 21-day Simple Moving Average (SMA) at 1.0833, below which the 1.0800 support could be tested. The 100-day SMA aligns at that level. Further south, the confluence zone of the 50-day SMA and the 200-day SMA near 1.0775 could act as a tough nut to crack for Euro sellers,” Dhwani adds.