ECB Set to Keep Rates Unchanged Amid Inflation Strains

The European Central Bank is poised to maintain current interest rates on Thursday but will likely hint at a future rate cut, albeit vaguely and with conditions. Last month's rate reduction, the first in a series of expected cuts, was seen as premature by some policymakers amid high inflation and wage growth.

ECB President Christine Lagarde will need to balance the narrative by acknowledging the anticipated decline in price pressures while noting that risks remain, necessitating more data before any additional policy changes. Market expectations align with further easing, anticipating as many as five rate cuts by the end of next year.

Nonetheless, inflation and wage growth present ongoing challenges, even as projected economic growth remains weak. The ECB's reluctance to drastically shift policy contrasts with the U.S. Federal Reserve's anticipated rate cuts, underscoring a cautious stance in the face of enduring economic uncertainties.

(With inputs from agencies.)