Essentials

• The European Central Bank (ECB) maintained its main refinancing operation rate at 4.50%。
• The marginal lending facility rate remains at 4.75%, the deposit facility rate remains at 4.00%。
• EUR / USD retracts as traders react to ECB decision and subsequent press conference。

On January 25, 2024, the European Central Bank announced its interest rate decision.。The central bank decided to keep interest rates at 4.5%, in line with analyst consensus。

The ECB notes that the current level of interest rates, if maintained long enough, will drive inflation towards the medium-term target of 2 per cent.。

At the press conference, Lagarde noted that the European economy is likely to stagnate in the fourth quarter of 2023.。However, some forward-looking indicators point to growth。

According to the ECB, inflation continues to fall and is expected to slow further in 2024.。Lagarde said the duration of the Middle East conflict could have an impact on inflation as supply chains are disrupted and transport costs rise.。

Lagarde also talked about the potential timing of a rate cut, the most important catalyst for the market。According to Lagarde, the broad consensus of the ECB is that it is too early to discuss a rate cut。

Lagarde discusses wage data in detail as an important catalyst in decision-making。For now, the ECB is waiting for additional data that could prove a slowdown in wage growth.。

Interestingly, Lagarde was asked about the level of the neutral rate。Her answer was that she did not know the exact level of the neutral rate, and the ECB would remain data-dependent in its decision-making.。

EUR / USD steady at 1 as traders react to ECB rate decision and subsequent press conference.Near 0860。Traders are trying to assess when the ECB will start cutting interest rates, but there is no clear message yet。For detailed economic events, please check our economic calendar。