ECB Meeting Accounts Revealed Cautious Optimism

FRANKFURT (Reuters) – European Central Bank policymakers felt relaxed about the recent drop in inflation during their last month’s meeting but advocated for a gradual policy easing due to ongoing price pressures. The meeting accounts from September 12 were released on Thursday.

The ECB reduced interest rates in the previous month and indicated openness regarding its October decisions. Many policymakers have expressed support for a follow-up cut, hinting at a likely reduction next week despite some dissenting voices.

The accounts from the Sept. meeting reflected a more cautious tone, stressing the ongoing challenges in stabilizing inflation around the bank's 2% target amid a dismal growth outlook.

Members largely agreed that a gradual reduction in restrictive measures would be suitable if upcoming data aligns with baseline projections, as mentioned by the ECB.

ING's global head of macro commented that the minutes indicated the ECB's growing concern over disappointing growth, yet a hesitance to declare inflation issues resolved.

Having already cut interest rates twice, the ECB noted that inflation is nearing the 2% threshold and suggested that further easing is more about timing, considering weak growth and decreasing price pressures.

The ECB will meet again on Oct. 17, with market expectations leaning towards a forthcoming rate cut, followed by another anticipated reduction in December.

The discussions at September’s meeting revealed a divide; some officials expressed concerns about inflation potentially dropping too low, while others cautioned against prematurely declaring success over high growth.

The ECB emphasized that achieving the baseline inflation path to 2% is heavily reliant on lower wage growth and a boost in productivity rates that haven’t been witnessed in many years, surpassing historical averages.

Moreover, it was highlighted that inflation has recently fallen faster than anticipated, making the risk of missing the target non-negligible.