Money markets pared back their bets on European Central Bank rate cuts on Thursday, now pricing in just a 50% chance of an additional 25-basis-point easing move by the end of the year.

Markets had on Wednesday seen a 58% chance of a rate cut by December (EURESTECBM3X4=ICAP), which was down near certainty last week, before the announcement of the U.S.-Japan trade deal and the ECB meeting.

The ECB left interest rates unchanged and offered a modestly upbeat assessment of the euro zone economy, though markets largely reacted to a press conference by ECB President Christine Lagarde in which she suggested the bar for more cuts was high.

Rohan Khanna, head of euro rates strategy at Barclays, said that Lagarde had sounded dismissive of any factor that could put a dovish spin on the bank’s policy path.

Germany’s two-year yield was up 0.5 basis points (bps) to 1.94%, after hitting 1.965% earlier in the session, its highest since early April. (DE2YT=RR)

Early in the session, euro area short-dated yields tracked their U.S. peers, which rose on Wednesday after Federal Reserve Chair Jerome Powell said it was too soon to determine whether the central bank would cut interest rates in September.

U.S. Treasury yields briefly pared declines on Thursday in choppy trading following U.S. data.

Thursday inflation data from some of the euro zone’s biggest economies also gave no reason for further rate cuts, showing price rises at or just above expectations this month, suggesting Friday’s bloc-wide data will hold near the ECB’s 2% target.

“The market relevance of inflation prints seems somewhat downgraded,” Citi said in Thursday’s morning note.

“One message from President Lagarde last week was that the ECB’s reaction function is far more focused on the 2027 consumer price index projection rather than the path to reach it.”

Longer-dated bond yields dipped slightly, however, causing curves to flatten in market parlance.

Germany’s 10-year bond yield, the benchmark for the euro zone, dropped 2 bps to 2.69%. (DE10YT=RR)

It is now around 74 bps higher than the two-year yield, making the curve its flattest in a month, albeit after substantial steepening this year. (DE2D10=RR)

Longer-dated bonds were helped at the margin by a small decline in longer-dated Japanese yields after a Bank of Japan policy statement caused market participants to push out expectations for any future interest rate hike.

Other moves were largely in line with the German benchmark. Italy’s 10-year yield was down 2 bps at 3.53%, maintaining its gap with Germany at 84 bps. IT10Y, (DE10IT10=RR)