No urgency for rate cuts -ECB policymakers

European Central Bank (ECB) policymakers showed no urgency in cutting interest rates during their July meeting but signalled that a fresh discussion on rate adjustments could occur in September, according to the 17-18 July monetary policy meetings accounts released on Thursday.

While the ECB left rates unchanged in July, the accounts revealed growing concerns about the potential negative impact of prolonged high rates on economic growth.

Policymakers noted that it was crucial to strike a balance between maintaining restrictive policies to control inflation and avoiding undue harm to the real economy.

The ECB highlighted that the September meeting would be an opportune moment to reassess the current monetary policy stance, suggesting an “open mind” approach to future decisions.

Recent economic data from the eurozone, including slower wage growth and weak economic performance, particularly in Germany, have bolstered the case for easing. Markets now predict a more than 90 per cent chance of a 25-basis-point rate cut in September, with another possible reduction by year-end.

Despite previous concerns about rapid wage growth, the ECB accounts indicate that policymakers are increasingly confident that inflation is on track to return to the 2 per cent target by the end of next year, with domestic cost pressures being mitigated by unit profits.