EMU: ECB Minutes

Thu Nov 23 06:30:00 CST 2017

Minutes of the ECB's October meeting show that the decision to recalibrate the monetary stance was taken quite easily. However, there were differences over the pace at which the monthly QE asset purchases should be cut in 2018 as well as some disagreements over both the overall size of the programme and the 'soft' September end-date. A number of Council members wanted purchases to finish after the 9-month extension.

With regard to the Eurozone economy, risks to the growth outlook were still seen to be broadly balanced. On the one hand, there were some upside risks associated with strong cyclical momentum but on the other hand, global factors and developments in foreign exchange markets kept downside risks alive too. More importantly, underlying inflation remained too low and had yet to show any clear signs of a sustainable move up towards target. In addition. longer-term inflation expectations were still low.

There is little in the minutes to give any fresh clues about where monetary policy is headed in 2018. Unless underlying inflation climbs more quickly than the ECB expects, key interest rates will be left on hold throughout the year while monthly QE asset purchases are pegged at E30 billion/month at6 least until September.

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.

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.