ECB keeps rates on hold, Lagarde pushes back on market expectations
(Reuters) -The European Central Bank left interest rates unchanged on Thursday and gave no hint of a possible reduction, reaffirming instead its commitment to fighting inflation.
The bank reiterated its key rate would stay at 4% for some time, and ECB President Christine Lagarde reiterated in a press conference after the decision that policymakers needed to be more confident that inflationary pressures really had subsided before moving towards cutting rates.
The euro fell against a range of other currencies, while European shares cut their losses and traded in positive territory.
MARKET REACTION:
STOCKS: European stocks rose 0.2%, having erased earlier losses. An index of euro zone banking shares was down 0.6%, while tech stocks rallied 1.3%.
FOREX: The euro fell by as much as 0.3% to a session low of $1.0854 and was last at $1.0845.
BONDS AND MONEY MARKETS: Interest rate futures continued to price in a roughly 60% chance of a first 25 basis-point ECB rate cut in April, but around 140 bps of cuts by year-end, compared with 130 bps before the rate decision.
Euro zone bond yields edged lower.
COMMENTS:
SEEMA SHAH, STRATEGIST, PRINCIPAL ASSET MANAGEMENT, LONDON
«Although President Lagarde 'stands by' her previous comments which suggested that summer cuts are likely, the rest of her narrative appears to be supportive of earlier rate cuts. As she noted, risks to economic growth are to the downside, underlying inflation remains on a downward trend, and wage growth is declining. The ECB is clearly data dependent, but the data they focus on are pointing to a rate cut within the next few months, potentially April. Summer might come early this year.»
FLORIAN IELPO, HEAD OF MACRO, LOMBARD ODIER ASSET MANAGEMENT, GENEVA:
«The
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