Payden & Rygel: ECB maintains cautious stance
The European Central Bank has kept its deposit rate unchanged at 2.25%, a decision that was widely expected by markets, according to Antonella Manganelli, CEO of Payden & Rygel Global SIM.
Manganelli: 'The Governing Council confirmed a cautious and fully data-dependent approach, against a backdrop of inflation still above target – fuelled by rising energy prices linked to geopolitical tensions – and moderate economic growth. President Christine Lagarde maintained a moderately hawkish tone, reiterating that there is no pre-set path for interest rates and leaving the door open to further action.
The September meeting is seen as the most likely time for a further rate hike, which could be followed by a pause to allow the ECB to assess the second-round effects of the energy shock and the persistence of inflationary pressures. The market, however, continues to price in a total of around two rate hikes by the end of the year. The market reaction was muted: Bund yields rose slightly and the EUR/USD exchange rate remained broadly stable. Against this backdrop, oil prices continue to be supported by tensions in the Middle East, confirming their status as the main risk factor for inflation and, consequently, for forthcoming monetary policy decisions.'