Highlights
The overall tone of the minutes is hawkish and suggests that in addition to the announced intention to raise interest rates by 50 basis points in March, the May meeting would also probably see a further tightening. However, there is clearly no agreement on what constitutes a restrictive level of interest rates with some members seeing the latest hike as bearing down on the economy but others still regarding the stance as accommodative.
In general, it was thought that front-end loading interest rate increases would be appropriate and avoid being forced into further tightening later on. That said, some members noted that with policy rates getting closer to their terminal level, it was important to ensure that policy was not tightened excessively. The lags involved in the transmission process inevitably made for an uncertain assessment of the likely impact of the rate rises delivered so far.
With regard to quantitative tightening, broad support was expressed for a simple and neutral approach, meaning that partial reinvestments between March and June would be conducted broadly in line with the current practice. The remaining reinvestment amounts would be allocated proportionately to the share of redemptions across each constituent programme of the Asset Purchase Programme (APP). In addition, it was noted that tilting reinvestments in the corporate sector purchase programme towards issuers with a better climate performance would signal the ECB's continued commitment to supporting the EU's policy for achieving the climate goals of the Paris Agreement.
In general, it was thought that front-end loading interest rate increases would be appropriate and avoid being forced into further tightening later on. That said, some members noted that with policy rates getting closer to their terminal level, it was important to ensure that policy was not tightened excessively. The lags involved in the transmission process inevitably made for an uncertain assessment of the likely impact of the rate rises delivered so far.
With regard to quantitative tightening, broad support was expressed for a simple and neutral approach, meaning that partial reinvestments between March and June would be conducted broadly in line with the current practice. The remaining reinvestment amounts would be allocated proportionately to the share of redemptions across each constituent programme of the Asset Purchase Programme (APP). In addition, it was noted that tilting reinvestments in the corporate sector purchase programme towards issuers with a better climate performance would signal the ECB's continued commitment to supporting the EU's policy for achieving the climate goals of the Paris Agreement.
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.
