Good investments are boring, George Soros once said. With the central banks three quarters of the same thing: when their leaders, the headlines fit, but something in the economy is failing. It happened during the inflationary crisis, but once the worst of the storm has passed, the European Central Bank has determined to be the boredom champion: it reached this appointment after seven interests of interest rates of 25 basic points in seven meetings, all of them conveniently anticipated by the market, which thus minimized the volatility of shares, bonds and currencies when the decision was announced. Frankfurt has put an end to that repetitive and crushing as effective on Thursday: the ECB has left intact interest rates in 2%, something that has not happened for a year, and opens a new era, more convoluted, less clear, in which their movements want more unpredictable.
The farewell to that stage of declines of types materialized with the same stable and predictable spirit of the preceding encounters. “Internal inflationary pressures have continued to relax and wages are growing more slowly,” said the ECB in its statement. The pause was given by inflation that, the figure registered in bronze letters in the mandate of the institution presided by Christine Lagarde. “The economy, together, has shown so far resistance in a difficult international environment. At the same time, the environment continues to be exceptionally uncertain, especially due to commercial disputes,” added the bank, aware that if they deranged the conversations between Washington and Brussels on tariffs, the scenario would change radically.
Despite the usual cautions, the members of the ECB leave on vacation leaving behind a panorama. The Federal Reserve has not known monotony. Nor in the figures, with aggressive type cuts in September, light in November and December, and stopped since then in fear of an inflationist rebound for tariffs. Not in his daily work, under the awkward daily fire of the invective of Donald Trump, which tonight will step on his headquarters for the first time.
The ECB numbers do seem to fit, but if Lagarde opens during the summer rest linked to work, it is surely that of the evolution of the currency market. Although the ECB has paid poor attention to the exchange rate in the postpandemics period, the appreciation of the euro is gaining positions in the list of concerns, with the level of $ 1.20 as a limit of the acceptable. “Something beyond that would be much more complicated,” Vice President Luis de Guindos acknowledged at the beginning of the month.
The BCE inflation objective is symmetrical. That is, positive and negative deviations consider equally undesirable. And a euro too strong tends to pull inflation down, because. That gives arguments to the Most Paloma sector of the Eurobanco to claim new type cuts, especially when the ECB, unlike the Fed, is at the end of its flexibility cycle, and priori, the future sales of types in the US-whose rates are still in a high range of 4.25-4.50%-should continue to deflate the dollar. The correlations of the economy manuals, however, have become less reliable due to the influence of other factors, such as the pressure of the White House on Powell, political uncertainty or concerns
Seven weeks after the next September meeting, there is a wide division about what the Eurobanco will do. The markets grant practically half of possibilities to a cut of 25 basic points and an extension of the pause. There is also a gap in the statements of the members of the Governing Council. While Falcones such as the Governor of the Austrian Central Bank, Robert Holzmann, and the German Isabel Schnabel, have been reluctant to return to the downstream path, others such as the governor of the Bank of Finland, Olli Rehn, the Frenchman François Villeroy de Galhau, and the Italian Fabio Pannetta see margin to act.
That day, the ECB will also present its update of the forecasts of growth and inflation. And many things can happen on the road. The most relevant is probably the closure of a commercial agreement between Brussels and Washington, which can be resolved favorably imminently. A pact in the image and likeness of the signed between the US and Japan that would avoid the worst stage of 30% with which Trump threatened to the EU if an exit was not achieved before August 1, and would clear one of the great uncertainties that fly over the predictions of the ECB analysis team.
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