A “large majority” on the European Central Bank’s 26-member interest-rate-setting panel supported March’s decision for a half-point hike, according to an account of the meeting that took place as shares in Credit Suisse Group AG were plunging.
(Bloomberg) — A “large majority” on the European Central Bank’s 26-member interest-rate-setting panel supported March’s decision for a half-point hike, according to an account of the meeting that took place as shares in Credit Suisse Group AG were plunging.
Following through on that planned 50 basis-point move was seen as important to avoid creating market uncertainty, the account — released Thursday — showed. Some policymakers saw risks to the inflation outlook as skewed to the upside and expressed doubts in the current projections for prices.
Investors are looking for clues on the size of the rate hike when the ECB next sets policy in two weeks. The big unknown in the deliberations is how damaging the recent banking-sector turmoil has been to credit growth. Data on that, as well as April’s inflation reading for the 20-nation euro zone, will only arrive days before the decision.
Here’s what the account revealed on key topics:
Monetary policy
- “A very large majority agreed with Mr Lane’s proposal to raise the ECB’s key interest rates by 50 basis points, in line with the intention the Governing Council had communicated at its last monetary policy meeting. It was acknowledged that in the current situation of heightened uncertainty a decision had to be taken with imperfect information”
- “It was underlined that if the inflation outlook embedded in the March ECB staff projections were confirmed, the Governing Council would have further ground to cover in adjusting the monetary policy stance to ensure a timely return of inflation to target”
- “Following the announced intended interest rate path was seen as important to instill confidence and avoid creating further uncertainty in financial markets”
Inflation
- “A number of members seeing risks as tilted to the upside over the entire horizon. Some members argued that there was only a small probability that inflation would fall back to low levels as quickly as suggested in the March ECB staff projections”
- “Unless the situation deteriorated significantly, the financial market tensions were unlikely to fundamentally change the Governing Council’s assessment of the inflation outlook”
Economic outlook
- “Risks to the outlook for economic growth were tilted to the downside. Persistently elevated financial-market tensions could tighten broader credit conditions more strongly than expected and dampen confidence”
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