The minutes of the May monetary policy meeting of the European Central Bank (ECB) have revealed on Thursday that several members initially expressed their preference for raising official interest rates by 50 basis points.
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“More decisive action was warranted to drive rates into sufficiently restrictive territory to ensure a timely return of inflation to target.”
“Most of these members indicated that they could accept the proposed rate hike of 25 basis points.“.
“Nevertheless, ECB communication should convey a clear directional bias“.
“Almost all members supported the 25 basis point rate hike“.
“There was a strong bias against going back to direct targeting.”
“Members generally considered that financial markets are capable of digesting a complete liquidation of the portfolio“.
“He also expressed caution against too rapid contraction of the Eurosystem’s balance sheet“.
“There was now stronger evidence that monetary policy was being transmitted to financing and credit conditions.”
“It was also argued that the transmission could be weaker than usual.”
“Evidence was highlighted that various measures of longer-term inflation expectations had exceeded 2%.”
Source: Fx Street
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