ECB members expressed widespread concern about the spread of inflation and supported the continuation of the policy normalization, according to the minutes of the ECB meeting on 14 April.
With inflation soaring to a record 7.4%, the ECB reaffirmed its plans at the meeting to end the bond market in the third quarter, but maintained an otherwise non-binding tone, avoiding other commitments, including and for interest rates, which remain deeply negative.
“Members of the ECB have expressed concern about high inflation. Members widely share the view that the gradual normalization of monetary policy should continue.”
The ECB adds that “some members considered it important to act without undue delay. There was also a risk that, if the board did not signal a faster normalization process, inflation expectations would continue to rise.”
Nearly everyone who has spoken publicly now supports a rate hike in July, the ECB’s first in a decade, and many are pushing for a positive deposit rate hike this year, which stands at -0.5%.
Their concern is that inflation is not only high, but that it is gaining ground, increasing the risk that rapid price increases will consolidate well above the ECB’s 2% target.
The ECB will meet on June 9 to close bond purchases in the middle of the year, and will most likely make unequivocal hints that interest rates will follow at the July meeting.
Some policymakers would have preferred raising interest rates in June, but the bank has promised that bond purchases will not end before the third quarter and interest rates will only rise after that.
Source: Capital
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