Highlights
Minutes of the June ECB meeting confirm a near-unanimous decision to cut key interest rates by 25 basis points. Only one member of the Governing Council (Austria's Robert Holzmann) wanted to keep policy on hold.
It was noted that since the meeting last September, inflation had fallen by more than 2.5 percentage points and the inflation outlook had improved markedly. The inflation projection for the fourth quarter of 2025 had fluctuated in a very narrow range of between 1.9 percent and 2 percent over that period, increasing confidence in the reliability, solidity and robustness of the projection showing that inflation would return to the 2 percent target in a timely manner. Underlying inflation had also eased, reinforcing the signs that price pressures had weakened, and over this period inflation expectations had broadly declined at all horizons. Monetary policy had kept financing conditions restrictive and by dampening demand and keeping inflation expectations well anchored, this had made a major contribution to bringing inflation back down.
The dissenting voice pointed to upside risks to inflation that did not support the case for a rate cut. In particular, the recent data showed stickiness in inflation which could be exacerbated by several different geopolitical risks. In addition, a decoupling from the path of U.S. interest rates might add to inflationary pressures via exchange rate effects.
More generally, in view of continuing uncertainty surrounding the disinflationary process and the bumpy path ahead, it was seen as important to maintain a data-dependent and meeting-by-meeting approach to policy. There should be no pre-commitment to a particular rate path, so that full optionality could be retained. Members also reiterated that monetary policy should continue to be based on the established elements of the reaction function.
The June minutes are unlikely to have much impact on market speculation about the outcome of this month's meeting. Until there has been further clear evidence that inflation remains on track to sustainably meet its 2 percent medium-term target, interest rates are likely to remain on hold. A move before the September gathering when the bank's economic forecasts will be updated still seems very unlikely.
It was noted that since the meeting last September, inflation had fallen by more than 2.5 percentage points and the inflation outlook had improved markedly. The inflation projection for the fourth quarter of 2025 had fluctuated in a very narrow range of between 1.9 percent and 2 percent over that period, increasing confidence in the reliability, solidity and robustness of the projection showing that inflation would return to the 2 percent target in a timely manner. Underlying inflation had also eased, reinforcing the signs that price pressures had weakened, and over this period inflation expectations had broadly declined at all horizons. Monetary policy had kept financing conditions restrictive and by dampening demand and keeping inflation expectations well anchored, this had made a major contribution to bringing inflation back down.
The dissenting voice pointed to upside risks to inflation that did not support the case for a rate cut. In particular, the recent data showed stickiness in inflation which could be exacerbated by several different geopolitical risks. In addition, a decoupling from the path of U.S. interest rates might add to inflationary pressures via exchange rate effects.
More generally, in view of continuing uncertainty surrounding the disinflationary process and the bumpy path ahead, it was seen as important to maintain a data-dependent and meeting-by-meeting approach to policy. There should be no pre-commitment to a particular rate path, so that full optionality could be retained. Members also reiterated that monetary policy should continue to be based on the established elements of the reaction function.
The June minutes are unlikely to have much impact on market speculation about the outcome of this month's meeting. Until there has been further clear evidence that inflation remains on track to sustainably meet its 2 percent medium-term target, interest rates are likely to remain on hold. A move before the September gathering when the bank's economic forecasts will be updated still seems very unlikely.
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.
