ECB Held Rates Steady, Stressed Importance of Wage Growth in Next Decisions

As expected, the European Central Bank left interest rates unchanged in its announcement this week and refrained from providing future guidance.

European Central Bank President Lagarde and policymakers unanimously agreed to keep the deposit facility rate at 3.75% and the main refinancing operation rate at 4.25%.

They indicated in their official statement that: “Domestic price pressures remain elevated, services inflation has picked up, and headline inflation is likely to remain above target well into next year.”

Link to the official European Central Bank monetary policy statement for July

ECB officials also stressed their data-driven approach at each meeting, stressing that they are not pre-committing to a specific path for interest rates.

During the press conference, Lagarde mentioned that the risks to the euro area growth outlook are tilted to the downside. She also introduced the idea of ​​wage and profit productivity (WPP) in explaining how to monitor how labor costs evolve and their impact on overall inflation based on changes in productivity as economic growth slows.

Link to ECB Governor Lagarde’s press conference

Market Reactions

Euro vs Major Currencies: 5 minutes

Euro overlay against major currencies Chart by TradingView

The euro, which had been moving cautiously in a narrow range ahead of the ECB decision, was almost unchanged during the actual announcement by the central bank as the decision to keep interest rates on hold was widely expected.


The pair briefly dipped after the press conference, before eventually stabilizing and rising against most of its peers, except for the US dollar. EUR/JPY resumed trading above pre-ECB levels a few hours later, while EUR/NZD and EUR/AUD followed suit.

DecisionsECBGrowthheldImportanceratessteadystressedwage
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