Christine Lagarde, the head of the European Central Bank (ECB), discussed the bank’s choice to maintain key interest rates during its July policy meeting and addressed media questions.
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The European Central Bank (ECB) announced on Thursday that, as anticipated, it adjusted its key rates in the wake of its July meeting. The interest rates for major refinancing operations, along with marginal lending and deposit facilities, were set at 2.15%, 2.4%, and 2%, respectively.
Key points from the ECB policy statement
“The latest information aligns well with our previous assessment of the inflation outlook.”
“Domestic price pressures are easing, and wage growth is slowing down.”
“Despite a challenging global environment, the economy has shown overall resilience, which partly reflects the ECB’s earlier interest rate cuts.”
“However, uncertainties remain high, particularly regarding trade disputes.”
“We adopt a data-driven approach, assessing monetary policy on a meeting-by-meeting basis.”
“The ECB’s decisions are influenced by the inflation outlook and relevant economic and financial data.”
“We’ve not committed to any specific rate pathway in the past.”
Reactions to ECB policy decisions
Following the ECB announcement, EUR/USD remained relatively unchanged, last trading at 1.1755, down 0.15% for the day.
Euro price this week
The chart below illustrates the euro’s performance against major currencies this week, showing it was the strongest against the US dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -1.06% | -0.99% | -1.01% | -0.76% | -1.53% | -1.34% | -0.87% | |
| EUR | 1.06% | 0.15% | 0.07% | 0.30% | -0.52% | -0.46% | 0.15% | |
| GBP | 0.99% | -0.15% | -0.30% | 0.18% | -0.63% | -0.40% | 0.20% | |
| JPY | 1.01% | -0.07% | 0.30% | 0.25% | -0.49% | -0.38% | 0.31% | |
| CAD | 0.76% | -0.30% | -0.18% | -0.25% | -0.71% | -0.58% | -0.16% | |
| AUD | 1.53% | 0.52% | 0.63% | 0.49% | 0.71% | 0.13% | 0.81% | |
| NZD | 1.34% | 0.46% | 0.40% | 0.38% | 0.58% | -0.13% | 0.59% | |
| CHF | 0.87% | -0.15% | -0.20% | -0.31% | 0.16% | -0.81% | -0.59% |
The heatmap displays the currency changes among major currencies, based on selected currencies.
Upcoming ECB monetary policy announcement
- The European Central Bank is set to hold a significant rate this Thursday, the first time in over a year.
- Eurozone inflation has reached the ECB’s 2% target, though uncertainties persist in US-EU trade relations.
- The EUR/USD pair might see high volatility following the ECB policy announcement.
The ECB appears inclined to maintain key interest rates steady after its July policy meeting. This follows a series of interest rate cuts in its previous seven meetings. The announcement is scheduled for 12:15 GMT on Thursday.
A press conference with ECB President Christine Lagarde will take place shortly after, at 12:45 GMT.
This policy announcement could significantly influence the performance of EUR/USD, as it faces potential volatility during President Lagarde’s remarks.
What are the expectations for the ECB rate decision?
Market anticipation is focused on the ECB’s policy statement, looking for clues about the possibility of renewed interest rate cuts amid uncertainties around US tariffs and their effects on the eurozone economy.
Current inflation measured by the HICP (Harmonized Index of Consumer Prices) returning to the ECB’s target of 2% in June is one of the primary factors behind the believed pause in any rate modifications.
Service inflation has shown a slight uptick to 3.3% in June after a dip in May, though it remains down from 4% in April.
Additionally, tensions related to a potential US-EU trade agreement are likely to keep the ECB in a cautious stance.
European Commission officials recently suggested ongoing trade negotiations aim to impose 15% tariffs on European products while granting some exemptions.
Central banks typically prefer clearer trade scenarios before deciding on interest rate changes.
The ECB is also likely to consider the euro’s performance this year, which has been positively influenced by the USD’s downward trend.
US President Donald Trump’s unpredictable trade policies and critiques of the Federal Reserve have played a role in weakening the USD.
A stronger euro might alleviate imported inflation, increasing the likelihood of inflation stabilizing at the ECB’s targets, making room for potential rate cuts later in the year.
Thus, the decision to hold rates steady is seen as a sensible move for the ECB in July. The market is anticipating rate cuts might occur in September.
How will ECB meetings impact EUR/USD?
As we approach the ECB meeting, the EUR/USD pair has seen a three-week recovery from its low of 1.1556. Will this trend hold?
If the ECB’s statement or President Lagarde suggests that the current trends remain intact despite tariffs, it might fuel speculation for potential interest rate cuts this year. In that case, EUR/USD could reach multi-year highs.
Conversely, if the ECB acknowledges rising inflation risks but continues to follow a “data-dependent” policy in light of tariffs, this might enable EUR/USD to regain further ground.
Dhwani Mehta, an analyst at FXStreet, summarizes the current technical outlook for EUR/USD.
“The pair recently reclaimed the 21-day simple moving average at 1.1709, but the 14-day RSI indicates a mild bullish momentum, suggesting some upside potential remains for this currency pair.”
“On the flip side, immediate resistance is seen at the multi-year high of 1.1830 from early July, and crossing that could set sights on the 1.1900 level,” added Dhwani.
ECB FAQ
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the eurozone. It manages interest rates and oversees regional monetary policy, with a focus on maintaining price stability, which means keeping inflation around 2%. Its primary methods involve adjusting interest rates. Typically, higher rates strengthen the euro, while lower rates can weaken it. Decisions are made by the ECB Management Council at eight meetings held each year, involving six permanent members plus Christine Lagarde, the ECB president.
In extraordinary situations, the ECB can implement quantitative easing (QE), a tactic that entails creating euros to buy assets like government bonds from financial institutions. Generally, QE tends to weaken the euro and is a last resort when managing inflation expectations through interest rates alone is insufficient, as seen during the 2009-11 financial crisis and the COVID-19 pandemic.
Quantitative tightening (QT) opposes QE. It typically follows QE after an economic recovery and rising inflation. In this case, the ECB stops its bond purchases and keeps the proceeds from existing bonds without reinvesting them, which usually has a favorable effect on the euro.
