ECB Keeps Rates Unchanged, No Hints Given

The European Central Bank kept interest rates unchanged, and gave no hints as to what investors might expect at its next meeting, saying September was "wide open" and arguing inflation would stay above its target well into next year.

The euro dipped to $1.09208, from $1.0933 before Lagarde started speaking . Government bond yields across the euro area pulled back slightly, while Europe's broad STOXX 600 share index extended gains modestly -- last up 0.6% on the day.

ECB President Christine Lagarde said the monetary policy decision had been unanimous and reiterated the central bank's determination to be dependent on data, rather than on any single data point.

"The question of September and what we do in September is wide open," she said at the press conference.

The ECB may have disappointed market observers who were hoping the central bank would lay out a clear policy path. But their refusal to pre-commit is a sound decision. Although inflation has come down significantly, there are some segments of price pressures that continue to look sticky and stubborn.

Moreover, with the economy showing signs of a cyclical upturn, the euro area is not in dire need of aggressive, back-to-back rate cuts.

After the communications failure at the June meeting – before which Governing Board members signaled that rates would be cut, only to have incoming data suggest that it would be better to leave policy unchanged – the press release avoided commenting on the outlook for interest rates. That was helpful.

The ECB held borrowing costs steady at 3.75% but gave no hints about its next move -- and neither did President Christine Lagarde -- arguing that price pressures remain high and inflation will be above its target well into next year.

While a raft of downbeat earnings and trade concerns have weighed on the benchmark index subdued this week, rate cut expectations have gripped investors' attention.