ECB's Lagarde Says Forward Guidance Was a Regret as Rate Debate Shifts

Bank of England Governor Andrew Bailey said the decision not to raise rates at the last meeting was based on a softening economy. "We have got a softening economy, labor market," Bailey said. He said cutting rates is off the table at the moment, adding that energy prices have come down and the central bank has a delayed reaction mechanism to energy prices. The British pound slipped against the dollar after Bailey's comments, with GBP/USD trading near $1.2630. The forex market analysis for cable shows the pair testing a support zone that has held since mid-May.

Bank of Canada Governor Tiff Macklem said the BOC left its policy rate unchanged and is comfortable with current settings. "When we looked at the policy decision, we think we are about at the right level to keep inflation contained," Macklem said. He acknowledged the economy is soft but inflation remains clearly above target. "We have got to be humble amid uncertainty," he added. "If the situation changes, we are prepared to take action."

Lagarde's rejection of forward guidance signals a potential change in how the ECB communicates its intentions. Markets have priced in a roughly 70% chance of a quarter-point rate hike at the July meeting, according to swaps data. The next ECB meeting is scheduled for July 27.

For the euro, the shift opens a wider range of outcomes at each decision. Without forward guidance, the currency could react more sharply to data prints and policymaker comments in the weeks between meetings. EUR/USD held near $1.0910 after the panel, with gains capped by a softer risk tone in equity markets.