The European Central Bank (ECB) held the current interest rate level on Thursday, keeping the main interest rate unchanged at 3.75%, in line with market expectations. This measure reflects the ECB's ongoing efforts to balance economic growth and price stability in the eurozone.

Inflation remains the focus of attention

Although the overall inflation rate slightly decreased from 2.6% in May to 2.5% in June, the core inflation rate (excluding volatile energy and food prices) remained stable at 2.9%. This data is higher than market expectations, indicating that there is still persistent inflationary pressure within the eurozone economy. The stubbornness of the core inflation rate remains a major concern for policymakers.

ECB's monetary policy stance

The ECB's Policy Committee emphasizes that the current monetary policy continues to implement tight financing conditions. They pointed out that the domestic price pressure is still relatively high, especially in the service industry. The committee expects that the overall inflation rate may remain above the target level by next year, indicating the need for long-term vigilance.

Labor market pressure

An important factor affecting ECB decisions is the ongoing pressure in the labor market. Wage growth and employment levels continue to play a crucial role in shaping inflation expectations and overall economic prospects. The central bank is closely monitoring these indicators to look for signs that may have a second impact on inflation.

Factors affecting future decision-making

The central bank pointed out that they will continue to focus on three key areas: the overall inflation outlook, the behavior of underlying inflation, and the strength of monetary policy transmission.

The ECB emphasized that they have not committed to a specific interest rate path and will maintain flexibility in future policy decisions. This stance enables the central bank to quickly respond to changes in economic conditions and the emergence of new data.

Market expectations

Despite the ECB's cautious stance, market pricing shows expectations for another 25 basis point rate cut later this year. It is expected to take place in September and December, and may be suspended during the October meeting. However, traders should be aware that these expectations may be adjusted based on emerging economic data and global market developments.

Economic growth considerations

Although inflation remains a major issue, the ECB also recognizes the necessity of supporting economic growth in the eurozone. The balance between controlling inflation and promoting growth remains a delicate issue that affects the decision-making process of central banks.

Short term market forecast

Based on the ECB's decision to maintain interest rates and ongoing inflation concerns, the short-term outlook for the euro seems bearish.

The cautious attitude of the central bank and sustained inflationary pressures may continue to put pressure on the euro in the near future. However, traders should closely monitor the upcoming economic data, especially those related to wages, economic growth, and productivity, as these factors may affect future ECB decisions and market trends. Market pricing suggests that the possibility of future interest rate cuts may also affect the valuation and trading strategy of the euro in the coming months.