ECB and Federal Reserve hold interest rates steady amid inflation and dissent

The European Central Bank (ECB) maintained its main refinancing rate at 2.4% following its July meeting. Despite the pause, eurozone inflation rose to a preliminary 2.9% in July, up from 2.8% in June, driven largely by energy costs. This increase in both headline and core inflation has reduced the margin for further interest rate pauses, with markets pricing in a potential 25-basis-point hike in September.

In the same period, demand for liquidity among eurozone banks increased. The ECB allocated 16.709 billion euros in its weekly main refinancing operation, an increase of 0.215 billion euros from the previous week. While the number of bidding institutions decreased to 68, the total volume of funds allocated rose.

In the United States, the Federal Reserve kept its interest rate corridor unchanged at 3.50% to 3.75%. However, the decision was met with significant internal dissent, as three of the twelve voting members advocated for an immediate 25-basis-point increase, marking the strongest disagreement within the committee in ten years.