Minutes of the March meeting confirm a still hawkish slant to ECB policy. Although there were some concerns about instability in the global banking sector, the Governing Council (GC) thought that the central bank's toolkit was fully equipped to provide the region's institutions with liquidity support if needed and to preserve the smooth transmission of monetary policy. More importantly, it also saw underlying inflation pressures as too strong and, having already flagged another tightening at the February discussions, it was feared by some that a steady hand might be interpreted as carrying negative connotations for the health of Eurozone banks.

With regard to inflation, it was noted that the seasonally adjusted three-month-on-three-month annualised inflation rate had fallen from close to 11 percent last November to nearly 3 percent in February. However, the sharp drop in momentum was entirely due to declining energy inflation. For other components of the HICP, changes in inflation momentum were much more limited. In addition, wage pressures had strengthened, supported by a robust labour market and employees aiming to recoup some of the purchasing power lost due to rapidly rising prices. Moreover, many firms had been able to increase their profit margins in sectors faced with constrained supply and resurgent demand. Future behaviour here would be particularly important to the inflation outlook.

There were differing views on the impact of the monetary tightening delivered so far. On the one hand, some believed that in the past the effect of monetary policy had been continually overestimated, which might happen again. Others thought that, because of long transmission lags, the effects of the interest rate increases since July 2022 had not yet fully materialised, leading to a risk that the impact of monetary policy tightening was being underestimated. Consequently, it was not a unanimous vote to raise key rates by a further 50 basis points. Some members would have preferred to keep rates on hold until the financial market tensions had subsided and to conduct a comprehensive re-evaluation of the stance at the GC's next monetary policy meeting in May.

Since the March announcement, the general tone to ECB comments has remained hawkish and while some GC doves are clearly concerned about growth prospects, another hike in interest rates is widely expected next month.

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.