*

ECB cuts rates by 25 bps

*

ECB's Lagarde does not commit to October rate move

*

U.S. data douses hopes for big Fed cut

(Recasts, adds comments from ECB's Lagarde, FX table; changes byline)

By Gertrude Chavez-Dreyfuss

NEW YORK, Sept 12 (Reuters) -

The euro rose against the dollar on Thursday after European

Central Bank President Christine Lagarde dampened expectations for an

interest rate cut next month and said the bank will let economic data

dictate the next policy move.

"We are going to decide meeting by meeting,"

Lagarde

said in a briefing after the

ECB eased rates

again on Thursday by 25 basis points (bps) amid slowing inflation

and economic growth.

"I'm not giving you any commitment of any kind as far as that

particular date is concerned and our path is not predetermined at

all."

The ECB lowered its deposit rate to 3.5%, as widely expected.

The refinancing rate, however, was cut by a much bigger 60 bps to

3.65% in a long-flagged technical adjustment.

Rate futures have pared back bets of an October rate cut to

just more than seven bps from 10 bps just before Lagarde spoke,

according to LSEG calculations.

"Looking ahead, the path for interest rates remains

uncertain," said Yael Selfin, chief economist at KPMG in the UK.

"While there is widespread consensus on the Governing Council

that policy restrictiveness should be eased, divergent views remain

around the pace of cuts."

She expects further easing in December that would take the

deposit rate down to 3.25%. If the euro zone outlook weakens further,

Selfin sees ECB policymakers increasing the pace of cuts next year

towards a terminal rate of around 2.25%.

The euro was last up 0.3% at $1.1039, but down 0.5%

so far this week.

The euro rose 0.4% to 157.38 yen.

In the United States, the dollar index fell 0.2 to 101.58

, driven by gains in the euro, the largest component of the

index.

Against the yen, the dollar was last flat on the day at 142.41

, after gaining 0.2% so far this week.

Mixed U.S. economic data released on Thursday cemented

expectations of a 25-bp cut next week by the Federal Reserve.

U.S. initial jobless claims

rose

2,000 to a seasonally adjusted 230,000 for the week ended Sept.

7, data showed, in line with expectations.

U.S. producer prices increased slightly more than expected in

August to 0.2% as services costs rose, but the trend remained

consistent with ebbing inflation. Data for July was revised lower to

show the producer price index unchanged instead of edging up 0.1% as

previously reported.

Economists polled by Reuters had forecast the PPI gaining

0.1%.

"Stable producer prices should drive investment and that will

drive the economy," wrote Scott Helfstein, head of investment strategy

at Global X in emailed comments. "It is time for the Fed to cut, but

they may well take it slow and steady. That seems to be their

operating model."

The U.S. rate futures market has priced just a 13% chance of a

50-bp cut this month, down from as high as 50% on Friday following a

mixed U.S. nonfarm payrolls report.

For 2024, rate futures expect 105 bps cuts, down from about

113 bps earlier this week.

Bank of Japan board member Naoki Tamura, known as a policy

hawk, said on Thursday the BOJ must raise rates to at least 1% as soon

as the second half of the next fiscal year but added that it would

likely raise rates slowly and in several stages.

On Wednesday, fellow BOJ board member Junko Nakagawa

reinforced the central bank's tightening bias by saying low real rates

leave room for further rate hikes.

Those comments have helped the yen, which has gained 2.6% so

far this year versus the dollar.

In other currencies, sterling rose 0.3% versus the

greenback to $1.3083 after dipping to $1.30025 in the previous

session, its lowest since Aug. 20.

Currency

bid

prices at

12

September

​ 02:57

p.m. GMT

Descripti RIC Last U.S. Pct YTD Pct High Low

on Close Change Bid Bid

Previous

Session

Dollar 51

Euro/Doll 006

Dollar/Ye 965

Euro/Yen 54

Dollar/Sw 19

Sterling/ 033​

Dollar/Ca 66

Aussie/Do 656

Euro/Swis 79

Euro/Ster 38

NZ 3

llar

Dollar/No 771

Euro/Norw 009

Dollar/Sw 107

Euro/Swed 849