ECB Minutes: Members agreed that it was appropriate to take further steps on the path of monetary policy normalisation

RATES:

• A very large number of members agreed that it was appropriate to raise the ECB’s key interest rates by 50 basis points.


• Some members argued in favour of raising the ECB key interest rates by 25 basis points as this was the intended move communicated at the Governing Council’s June meeting and would preserve consistency with the Governing Council’s earlier communication.


• Decision to raise interest rates by 50 basis points at the present meeting should be regarded as frontloading the exit from negative rates and as part of the interest rate adjustment necessary to normalise monetary policy, rather than indicating a change in the rate to be expected as the end-point of the normalisation cycle.


• Governing Council was not changing its assessment regarding the terminal rate in the hiking cycle, which could only be determined more precisely when interest rates were approaching it more closely.


• It was argued that frontloading a 50 basis point increase in July would allow the Governing Council more flexibility in reacting to incoming data and proceeding with monetary policy normalisation at its future meetings.

GROWTH:

• Medium-term risks had also increased.


• It was argued that even a recession would not necessarily diminish upside risks, especially if it was related to a gas cut-off or another supply shock implying a further increase in inflation.

INFLATION: 

• Risks to the medium-term inflation outlook were seen to be clearly tilted to the upside.


• Persistently high inflation posed an increasing risk of longer-term inflation expectations becoming unanchored.

TPI:

• Memmbers unanimously supported the TPI

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25 Aug 2022 - 12:30- Fixed IncomeData- Source: ECB