ECB holds rates steady as focus shifts to autumn for possible cut

The European Central Bank left its key interest rate unchanged at 3.75% on Thursday, a decision widely expected by markets. The bank's president Christine Lagarde signaled that while inflation is trending lower, the fight is not yet won, and the next move could come in the autumn when more data on wages, growth, and services prices will be available. The decision keeps borrowing costs at their highest in over two decades, a level that has strained businesses and households across the eurozone. For German consumers and companies, the prolonged period of tight money is particularly painful. The country's economy barely grew in the second quarter, and manufacturing remains in recession. Savers, on the other hand, continue to benefit from higher deposit rates. Lagarde stressed that future decisions will remain data-dependent and not pre-committed to a specific timeline. Analysts now see September or October as the earliest window for a reduction. The ECB also trimmed its growth forecast for this year to 0.8% from 0.9%, while inflation is seen averaging 2.5% in 2024 before falling to 2.2% in 2025. Markets reacted with slight gains in bonds and a weaker euro, reflecting a dovish tilt in the statement's language about inflation risks. The autumn meeting will be pivotal as the ECB balances lingering price pressures against a fragile economic backdrop.