MNI ECB WATCH: ECB Holds Again Amid Narrowing Risks

The European Central Bank as expected held the deposit rate at 2% for a third consecutive meeting on Thursday, with President Christine Lagarde saying some risks to growth have abated and pointing to progress in trade talks involving the EU and China, the U.S. and China, and a ceasefire in Gaza.

"From a monetary policy point of view we are in a good place," she said, adding that uncertainty remained high and that it was not possible to say whether the next move by the ECB would be a cut or a hike.  "With growth of 0.2% for Q3, which is a tad more than what was expected by the consensus…. I would not complain too much about growth." (See MNI INTERVIEW: ECB's Wunsch Sees Less Chance Of Another Cut).

The decision to hold rates was unanimous, Lagarde said, though she acknowledged that there were different positions with regards to risks to inflation. The ECB will maintain its data-dependant, meeting-by-meeting approach, and will abide by its symmetrical 2% inflation target, she said.

ETS2 MINOR IMPACT

Asked about a the possible impact of a proposals to mitigate the impact of the planned extension of European Union’s ETS2 emissions trading scheme, Lagarde said that it will only have a minor effect on ECB’s inflation calculations.

"I would not read too much into a delay in ETS2," Lagarde said, calling proposed changes a "smoothing over a longer period", with a bit less of an effect on inflation in 2027 and a bit more in 2028. (See MNI: EC Autumn Inflation Forecast To Assume Mitigated ETS2)