EMU: ECB Minutes


Thu Jan 11 06:30:00 CST 2018

Highlights
Having already announced its plans for the 2018 QE programme in October, the minutes of the ECB's December meeting were never going offer much fresh insight into monetary policy.

As it is, they basically just reaffirmed the central bank's already stated intention to halve net QE asset purchases to E30 billion a month from January and to maintain that rate through at least September with the option of extending the deadline if thought appropriate.

Still, the minutes do highlight the growing unease amongst the more hawkish members regarding this 'soft' cut-off date for the programme. Clearly, a number of Council members, notably from Germany and Austria, think that the increasingly resurgent Eurozone economy could threaten medium-term prospects for meeting the near-2 percent inflation target. However, against that, there was debate as to whether the disconnect between (strong) economic growth and (persistently weak) inflation had become more entrenched. Indeed, some concern was expressed that inflation expectations, already low, could become unanchored should prices remain soft over a prolonged period. In such an environment, the risks to price stability from the current and proposed policy stance would not be a problem.

In sum, the December minutes provide little reason for supposing that there will be any significant modification to planned policy near-term. Nonetheless, cracks over when to end QE are starting to widen and it may well be that forward guidance has to adopt a tighter bias over coming months in order to present a united front.

Definition
The European Central Bank (ECB) meets about every six weeks to determine the appropriate stance of monetary policy. The precise details of the policy deliberations are kept secret for thirty years but, since the 22nd January 2015 meeting, summary version of the minutes have been made available around four weeks after the discussions have taken place.

Description
The minutes provide a key insight into what the ECB is focusing upon when setting policy. As such they potentially can have a sizeable impact upon investor sentiment; especially at times when speculation is rife about a possible near-term change in official interest rates and/or non-conventional monetary policy instruments.