And “very broad consensus” of the Governing Council of the European Central Bank (ECB) has sustained the rate increase of 25 basis points proposed by the chief economist Philip Lane in the last meeting, while initially a preference was also expressed for the increase of the key interest rates of the ECB by 50 basis points in view of the “risk that high inflation will become more persistent“. This is what emerged from minutes of the ECB meeting of 14-15 Junein which eurozone central bankers agreed to raise interest rates by 25 basis points.
“The emphasis was on the merits of sticking to a data-driven, meeting-by-meeting approach in an uncertain environment, particularly as rates were approaching a possible peak level“, is underlined. From the discussion among the bankers, it emerged that “the emphasis was placed on need to be sufficiently restrictive and persistent in tightening monetary policy and it was deemed “essential to communicate that monetary policy still has more ground to cover in order to bring inflation back to target in a timely manner”.
The end of reinvestments
A “very broad consensus” also prevailed in favor of confirming the end of reinvestments in APP starting from July, as proposed by Lane, although the preference was also expressed for the postponement of the decision to a later date, after the evaluation of the effects of the TLTRO reimbursements III of June on bank liquidity.
In another passage, it is highlighted that “it was noted that, while the Governing Council may need to continue with further interest rate measures, it should also be ready to stop the rate hike if required by the data and the judgement”. “By July, and even more so by September“, will be available new information which will allow the Governing Council to update its assessment of the inflation outlook, underlying inflation dynamics and the strength of monetary transmission. (Ticker)