The European Central Bank kept interest rates on hold at its meeting today and gave no clear signals about the future path of interest rates but economists were confident that a second cut in the current cycle will come in September.
President Christine Lagarde said in her press conference after the announcement that a move at the 12 September meeting was "wide open".
That rates were left unchanged was expected, with the central bank also maintaining its guidance, saying it will keep policy rates sufficiently restrictive for as long as necessary.
Headline inflation is likely to remain above target well into next year, the ECB said.
"The incoming information broadly supports the Governing Council’s previous assessment of the medium-term inflation outlook," the bank said in a statement.
"While some measures of underlying inflation ticked up in May owing to one-off factors, most measures were either stable or edged down in June. In line with expectations, the inflationary impact of high wage growth has been buffered by profits."
Deutsche Bank's chief European economist, Mark Wall, felt confident that the ECB "remains on course for a second rate cut in September".
He said that in spite of some recent inflation data being "less friendly", the ECB has "excused some as one-offs and others as absorbed in profit margins... taking comfort from the trends and looking through the noise, consistent with being ‘data dependent, not data point dependent’."
Jack Allen-Reynolds, deputy chief eurozone economist at Capital Economics, said the decisions to leave interest rates on hold and give no clear signals about the future path of interest rates were both in line with expectations.
"A cut in September still seems more likely than not, but it will depend on whether domestic price pressures ease," he said.
The ECB statement suggested that policymakers’ assessment of price pressures "hasn’t changed much" but there were some tweaks that were "arguably a touch on the dovish side".