The European Central Bank kept interest rates unchanged after a landmark easing of monetary policy last month.

The mentioned financial regulator did not disclose its plans for subsequent actions in the context of potentially possible changes in borrowing costs. It is worth noting that there is a widespread expectation among investors and analysts that the ECB will make another decision on cutting interest rates in September.

On Thursday, July 18, the deposit rate was kept at 3.75% by the financial regulator. This decision of the ECB coincided with the forecasts of experts interviewed by the media.

The refinancing rate the financial regulator continued to hold at the level of 4.25%. The marginal lending rate of the ECB is kept at the mark of 4.50%.

The financial regulator, without specifying and clarifying its plans, said that the cost of borrowing will remain quite restrictive as long as the appropriate level of interest rates will be necessary to ensure that inflation moves towards the 2% target.

The euro declined by 0.1% to $1.093 amid news from the ECB. Money markets continue to be dominated by the view that the financial regulator will make two decisions on cutting interest rates before the end of the current year.

The ECB is currently weighing whether inflation in the eurozone is cooling sufficiently to ease monetary policy further. Last month in this region the inflation rate was recorded at 2.5%.

ECB President Christine Lagarde said during an interaction with the media on Thursday in Frankfurt that inflation is expected to fluctuate around current levels until the end of 2024. She noted that the mentioned situation is partly due to energy-related base effects. Christine Lagarde also predicts that in the second half of next year, inflation will be fixed at the 2% target. According to her, the realism of the realization of the corresponding scenario is explained by such factors as weaker growth in labor costs, the effect of restrictive monetary policy, and the fading impact of the past inflation surge.

In the past, Christine Lagarde has said that officials need more data on the condition of the European economy to decide on a possible change in the concept of monetary policy. She also drew attention this year to the fact that the labor market in the euro area has shown surprising resilience during two years of economic stagnation. In this context, Christine Lagarde emphasized that the financial regulator can afford not to be in a hurry to lower borrowing costs.

The International Monetary Fund this week said that inflation in many major economies of the world is declining at a rate that is slower than the preliminary expectations regarding the dynamic of this process. Experts of the organization note that the specified state of affairs is mainly due to the growth of prices for services. They also say that the current situation raises the prospect of higher-for-even-longer interest rates.

The Bank for International Settlements said last month that financial regulators should not lower the cost of borrowing too quickly, as such tactics could cause prices to grow again.

As we have reported earlier, ECB’s Olli Rehn Sees Bets for Two More Cuts in 2024 as Reasonable.