ECB raises key rates by 25 bps in July monetary policy meeting, as expected

<ul><li><a href="https://www.forexlive.com/centralbank/ecb-raises-key-rates-by-25-bps-in-june-monetary-policy-meeting-as-expected-20230615/" target="_blank" rel="follow">Prior decision</a></li><li>Main refinancing rate 4.25% vs 4.25% expected</li><li>Prior 4.00%</li><li>Deposit facility rate 3.75% vs 3.75% expected</li><li>Prior 3.50%</li><li>Marginal lending facility 4.50%</li><li>Prior 4.25%</li><li>Inflation continues to decline but is still expected to remain too high for too long</li><li>Expectation is that inflation will drop further over the remainder of the year</li><li>But it will stay above target for an extended period</li><li>ECB decides to set the remuneration of minimum reserves at 0%</li><li>This is to preserve the effectiveness of monetary policy transmission</li><li>ECB stands ready to adjust all of its instruments within its mandate to ensure that inflation returns to its 2% target over the medium term</li><li>To follow a data-dependent approach to determining the appropriate level of interest rates</li><li><a href="https://www.ecb.europa.eu/press/pr/date/2023/html/ecb.mp230727~da80cfcf24.en.html" target="_blank" rel="nofollow">Full statement</a></li></ul><p>There is a very subtle change in this passage here by the ECB and that is what is perhaps weighing on the euro. In June, they said that:</p><p>"The Governing Council’s future decisions will ensure that the key ECB interest rates will be brought to levels sufficiently restrictive to achieve a timely return of inflation to the 2% medium-term target and will be kept at those levels for as long as necessary."</p><p>In July, now they are saying that:</p><p>"The Governing Council’s future decisions will ensure that the key ECB interest rates will be set at sufficiently restrictive levels for as long as necessary to achieve a timely return of inflation to the 2% medium-term target."</p><p>That's indicative that they may perhaps be done with rate hikes already. EUR/USD is down from around 1.1125 to 1.1100 currently.</p>

This article was written by Justin Low at www.forexlive.com.