The European Central Bank (ECB) will assess in September whether to cut interest rates based on price developments this summer, after leaving key rates unchanged in July.
According to the minutes of the July 17-18 meeting, published Thursday, the September meeting would be “a good time to reassess the level of monetary policy constraints,” creating the possibility of cutting interest rates.
However, ECB officials continue to stress the need to ensure that inflation reaches the 2% target and that they will keep interest rates “sufficiently restrictive for as long as necessary to achieve this objective.”
Policymakers estimate that inflation will fluctuate around the current level for the rest of 2024, before resuming its downward trajectory and reaching the ECB’s target of 2% in the second half of 2025.
At its July meeting, the ECB decided to keep interest rates on hold after cutting them by 25 basis points in June, in what it said was a “cautious approach” due to “ongoing uncertainty about the evolution of wages, profits, productivity and inflation in the services sector.”
Isabel Schnabel, a member of the European Central Bank’s executive board, also stressed that there had been volatility in markets since the June meeting in response to political news, and that the snap elections in France had also affected sentiment in stock markets. However, the impact on markets had been muted and short-lived, demonstrating its “resilience”.
In September, the Governing Council will therefore analyse the available macroeconomic indicators as well as the forecasts for the euro area in order to decide on the course of monetary policy.