ECB Press Conference: Lagarde speaks on policy outlook after holding rates steady in July

Christine Lagarde, President of the European Central Bank (ECB), explains the ECB's decision to leave key interest rates unchanged in July and responds to questions from the press.

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

ECB press conference key quotes

"Incoming data indicates that Euro area economy grew in the second quarter."

"Investments point to muted growth in 2024."

"We expect recovery to be supported by consumption."

"The labour market remains resilient."

"More jobs were likely created in the second quarter, mainly in services."

"Domestic inflation remains high."

"Wages are still rising at an elevated rate."

"Growth in labour cost will remain elevated in the near term."

"Wage growth is expected to moderate in the course of next year."

"Inflation is expected to fluctuate near current levels for the rest of the year."

"HICP to decline to target in second half of next year."

"Risks to growth are tilted to the downside."

"We spent a lot of times discussing wages, profits, productivity."

"Various wage measures point us in the direction of rather elevated levels."

"These were taken into account in June projections."

"Surveys indicated that elevated wage growth will decline in 2025 and 2026."

"There is limited recovery in productivity."

"The policy decision was unanimous."

"We are determined not to have a predetermined rate path."

"September decision is wide open."

"September projections, plus other data, will be taken into account."

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

The European Central Bank (ECB) announced on Thursday that it left key rates unchanged following the July 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 stood at 4.25%, 4.5% and 3.75%, respectively.

Key takeaways from ECB policy statement

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

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

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

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

"Eurosystem no longer reinvests all of principal payments from maturing securities purchased under PEPP, reducing PEPP portfolio by €7.5 billion per month on average."

"ECB intends to discontinue reinvestments under PEPP at end of 2024."

"ECB will continue applying flexibility in reinvesting redemptions coming due in PEPP portfolio, with a view to countering risks to monetary policy transmission mechanism related to pandemic."

Market reaction to ECB monetary policy decisions

The Euro showed no immediate reaction to the ECB's monetary policy announcements. At the time of press, EUR/USD was little changed on the day at 1.0935.

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This section below was published as a preview of the European Central Bank's (ECB) July policy meeting at 07:00 GMT.

• The European Central Bank is set to leave key rates unchanged after July policy meeting.
• ECB President Christine Lagarde will be questioned about the possibility of a rate cut in September.
• EUR/USD closes in on fresh 2024 highs ahead of the ECB’s policy announcements. 

The European Central Bank (ECB) will announce its monetary policy decisions following the July meeting on Thursday at 12:15 GMT. ECB President Christine Lagarde will deliver a prepared statement on monetary policy and respond to questions at a press conference starting at 12:45 GMT.

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

The ECB lowered key rates by 25 basis points (bp) following the June policy meeting, as expected. With this decision, the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility came down to 4.25%, 4.5%, and 3.75%, respectively. Rates are widely forecast to remain unchanged following the July policy meeting.

In June’s policy statement, the ECB reiterated that it will continue to follow a data-dependent and meeting-by-meeting approach in determining the appropriate level and duration of monetary restriction. The accounts of the meeting showed that some policymakers felt that the data available since the last meeting had not increased their confidence that inflation would converge to the 2% central bank’s target.

Previewing the ECB meeting, Deutsche Bank macro analysts said they expect the Governing Council to leave the policy settings unchanged and explained:

“Our baseline remains two more 25bp cuts in 2024, in September and December. A cut in September is not a done deal. Recent data suggest the ECB staff need to revise the near-term inflation outlook higher.”
Meanwhile, analysts at TD Securities note that markets will focus on whether the ECB softens its tone ahead of an increasingly likely September cut, adding they expect ECB President Lagarde to remain “vague and noncommittal.”

How could the ECB meeting impact EUR/USD?

Heading into the ECB showdown, the Euro preserves its strength, with EUR/USD trading at its highest level since March above 1.0900. The bullish action seen in EUR/USD, however, also seems to be fuelled by the broad-based selling pressure surrounding the US Dollar (USD) following the soft June inflation data, which fed into expectations for a Federal Reserve (Fed) rate cut in September.

ECB President Christine Lagarde is likely to avoid providing a clear response if she is asked about the possibility of another rate cut in September. Unless the policy statement, or Lagarde, pushes back against this expectation, the market positioning suggests that EUR/USD could have a hard time gathering bullish momentum, with investors already fully pricing in a Fed rate cut in September.

On the other hand, the Euro could come under bearish pressure if Lagarde adopts an optimistic tone on the inflation outlook and/or voices concerns over the slowdown in the Eurozone’s economic activity. Markets could see that as a sign pointing to another rate reduction in September and cause EUR/USD to correct lower.

Eren Sengezer, European Session Lead Analyst at FXStreet, offers a brief technical outlook for EUR/USD:

“EUR/USD remains technically bullish in the near term, with the Relative Strength Index (RSI) indicator on the daily chart holding comfortably above 60. On the upside, 1.1000 (psychological level, static level) aligns as the next resistance. In case the pair manages to flip this level into support, it could stretch higher toward 1.1100 and touch a new 2024-high in the process.”

“If EUR/USD retreats below 1.0900 and starts using this level as resistance, technical sellers could show interest. In this scenario, an extended correction toward 1.0800 (100-day, 200-day Simple Moving Averages) could be seen. If this support stays intact, however, buyers could see this retreat as an opportunity to get back into action.”