Highlights
Minutes of the July ECB meeting leave open the possibility of another cut in key interest rates next month but do little in themselves to boost the chances of a move.
Most Governing Council members thought the latest inflation developments were not out of line with the medium-term forecasts presented in June and noted that inflation expectations had remained firmly anchored. However, the current distribution of inflation expectations was still skewed to the upside and the rate in services had remained more persistent than expected. Core inflation measures were mixed and in general thought likely to be fairly flat over the remainder of the year. Labour cost dynamics would continue to be a key concern, with the interaction between wages, productivity and profits likely to be particularly important for the evolution of domestic inflation, as captured by the GDP deflator. In this respect, it was seen as reassuring that domestic cost pressures from high wage growth, including in the services sector, had been increasingly buffered by unit profits.
Still, with inflation coming down only gradually, it was seen as natural that the policy response should be cautious while also acknowledging the need not to unduly harm the real economy by keeping rates at a restrictive level for too long. To this end, ahead of new economic forecasts in September, there would continue to be particular focus on wages, profits, productivity and services inflation. That meeting should be approached with an open mind.
Most Governing Council members thought the latest inflation developments were not out of line with the medium-term forecasts presented in June and noted that inflation expectations had remained firmly anchored. However, the current distribution of inflation expectations was still skewed to the upside and the rate in services had remained more persistent than expected. Core inflation measures were mixed and in general thought likely to be fairly flat over the remainder of the year. Labour cost dynamics would continue to be a key concern, with the interaction between wages, productivity and profits likely to be particularly important for the evolution of domestic inflation, as captured by the GDP deflator. In this respect, it was seen as reassuring that domestic cost pressures from high wage growth, including in the services sector, had been increasingly buffered by unit profits.
Still, with inflation coming down only gradually, it was seen as natural that the policy response should be cautious while also acknowledging the need not to unduly harm the real economy by keeping rates at a restrictive level for too long. To this end, ahead of new economic forecasts in September, there would continue to be particular focus on wages, profits, productivity and services inflation. That meeting should be approached with an open mind.
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.
