By Marius Zaharia
LONDON, Aug 1 (Reuters) - Euro zone money market rates rose on Thursday, in defiance of 'forward guidance' from European Central Bank President Mario Draghi, with investors disappointed policymakers did not discuss interest rates cuts.
The ECB left its main refinancing rate at a record low 0.5 percent and affirmed it would stay there for some time but chances of further easing appeared smaller than after the last meeting, when Draghi said the Governing Council had an 'extensive discussion' about a cut.
Short-term euro rates have increased in recent days on the back of forecast-beating economic data in the euro zone but Draghi told his post-meeting news conference such an increase was 'unwarranted'.
His comments were not enough to prevent money markets erasing early falls in the wake of the Federal Reserve saying on Wednesday that the U.S. economy still needed stimulus.
'How can you say you want to bring money market rates lower and you don't even discuss a cut in the refi rate?' said David Keeble, global head of fixed income strategy at Credit Agricole in New York.
Euribor futures were 1-10 ticks lower compared with where they were before Draghi started speaking, trading flat on the day across the 2013-2016 strips.
That indicated the benchmark bank-to-bank three-month Euribor rate - a gauge of expectations of future official interest rates and counterparty risk - was expected to settle at higher levels over the period than initially thought.
The Dec-15 Euribor,, among the more liquid longer-term contracts, fell 10 ticks to 99.055, meaning the underlying Euribor rate was expected to settle at 0.945 percent in December 2015 rather than at 0.935 percent before the Draghi speech.
A day before the ECB first introduced its forward guidance on July 4, the same rate was expected to settle at 0.96 percent.
Both the implied Euribor and the forward overnight Eonia rates were flat to slightly lower compared with where they were just before July 4, meaning the forward guidance had been only partially successful, as Draghi acknowledged.
One-year Eonia in one year's time was 0.356 percent, compared with 0.358 percent before the previous meeting.
'Monetary conditions are not consistent with the policy objectives of the ECB,' said Lena Komileva, managing director at G+ Economics.
She added, though, that things could change later in the year when, as suggested by Draghi on Thursday, the ECB may decide to release minutes of its meetings to make forward guidance more effective.
(Editing by Nigel Stephenson) Keywords: MARKETS MONEY/
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