Highlights
Minutes of the October meeting show Governing Council (GC) members had become much less concerned about the inflation outlook and thought policy was now doing its job.
The Eurozone economy had remained weak in the third quarter with the manufacturing sector notably soft. Forward-looking indicators suggested further weakness in the fourth quarter with the construction sector likely to be a major drag. Moreover, risks to economic growth remained tilted to the downside.
Importantly too, core inflation had fallen by more than expected in September, albeit in part due to the discontinuation of the €9 public transport ticket in Germany last year. There had also been some indications that wage pressures were beginning to ease although it was noted that most negotiations would not take place until at the start of next year. However, it was also pointed out that consumer inflation expectations had risen since the previous meeting and would need watching closely over coming months.
Against this backdrop, confidence was expressed that the current monetary policy stance was sufficiently restrictive and all GC members agreed to hold the three main ECB interest rates at current levels. Even so, it was deemed important for the GC to avoid an unwarranted loosening of financial conditions and some members argued in favour of keeping the door open for a possible further rate hike, in line with the Governing Council's emphasis on data-dependence.
It was also agreed that the GC should continue to stress its determination to set policy rates, through its future decisions, at sufficiently restrictive levels for as long as necessary to bring inflation back to target in a timely manner.
The Eurozone economy had remained weak in the third quarter with the manufacturing sector notably soft. Forward-looking indicators suggested further weakness in the fourth quarter with the construction sector likely to be a major drag. Moreover, risks to economic growth remained tilted to the downside.
Importantly too, core inflation had fallen by more than expected in September, albeit in part due to the discontinuation of the €9 public transport ticket in Germany last year. There had also been some indications that wage pressures were beginning to ease although it was noted that most negotiations would not take place until at the start of next year. However, it was also pointed out that consumer inflation expectations had risen since the previous meeting and would need watching closely over coming months.
Against this backdrop, confidence was expressed that the current monetary policy stance was sufficiently restrictive and all GC members agreed to hold the three main ECB interest rates at current levels. Even so, it was deemed important for the GC to avoid an unwarranted loosening of financial conditions and some members argued in favour of keeping the door open for a possible further rate hike, in line with the Governing Council's emphasis on data-dependence.
It was also agreed that the GC should continue to stress its determination to set policy rates, through its future decisions, at sufficiently restrictive levels for as long as necessary to bring inflation back to target in a timely manner.
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.
