Payden & Rygel: ECB pauses interest rates
As expected, the European Central Bank left interest rates unchanged at today's meeting, keeping the refinancing rate at 2.65% and the deposit rate at 2.50%. Policymakers adopted a wait-and-see approach in light of rising inflation risks and slowing economic growth.
The ECB warned that high energy prices could fuel inflation, while also weighing on economic activity, particularly if indirect and second-round effects intensify. However, underlying inflation remains broadly stable, with no significant wage reaction so far. While no clear indications were given on future interest rate developments, the ECB noted that rising financing costs across Europe could further dampen growth and inflation.
President Lagarde announced her resignation from the ECB earlier than expected, prompting a limited market reaction. The reference to downside risks to growth was interpreted by the market as a dovish signal, but the overall tone remains cautious, and a rate hike in December remains likely, barring a significant reversal in energy prices.