ECB Poised to Hold Interest Rates Steady Amid Inflation Concerns

The European Central Bank is anticipated to maintain current interest rates on Thursday, even though its next move is projected to be a rate cut. This decision comes in the wake of elevated domestic inflation and wage increases, urging a more conservative approach following last month's rushed rate reductions.

ECB President Christine Lagarde faces the challenge of striking a balance, indicating that while price pressures are diminishing as predicted, lingering risks require additional data before making further policy decisions. Her pre-meeting communications suggest an uncomplicated policy session, keeping market focus on September for the next significant move.

Economist Jan von Gerich of Nordea mentioned that Lagarde will likely keep options open by stressing the importance of data. Markets expect almost two rate cuts this year and more next year. UBS economist Reinhard Cluse predicts the next cut in September, followed by gradual reductions in subsequent quarters, contingent on new macroeconomic projections.

(With inputs from agencies.)