July Governing Council — a pause that keeps optionality open

The Governing Council left the deposit rate unchanged at its July meeting and, more tellingly, declined to point markets toward September. After a first half in which the direction of travel was never in doubt, the absence of guidance is itself the message: the Council wants room to move either way, and it is willing to accept some market ambiguity in order to keep it.

Headline inflation has settled close to target and services inflation has continued to ease, but neither has moved far enough to make the next cut automatic. The wage data due in the early autumn will carry more weight in the September decision than anything published over the summer.

How we are positioned into September

We continue to expect the easing cycle to resume rather than end, though at a slower cadence than the spring consensus assumed. That view argues for holding duration in the two- to five-year part of the curve, where real yield is still available without requiring a strong directional call on where the terminal rate finally settles.

For depositors the practical implication is the one we have made all year: today's euro deposit yields are unlikely to be repeated later in the cycle, and laddering maturities now costs less than waiting for a clarity the Council has just told us it does not yet have itself.

We will revisit positioning after the September meeting. Until then, patience is the position.

---

This commentary is provided for information only and does not constitute investment, tax or legal advice. The value of investments and any income from them can fall as well as rise. Figures cited are illustrative for this prototype.