- It was argued that it was important to put the recent appreciation of the euro into a broader perspective
- Recent moves could be seen more as fluctuations of a temporary nature than as part of a consistent trend in one direction
- This would imply that the passthrough to consumer prices should be low given the way in which firms typically priced their goods in the face of exchange rate volatility
- Doubts were expressed about whether the euro’s performance could really be attributed to underlying strength of the euro area economy
- An alternative interpretation of the euro’s performance was that it in fact reflected a fundamental weakness of the dollar
- Geopolitical risks were very high and warranted close attention
- The implications for fiscal policy were also becoming increasingly relevant, as geopolitical tensions could require even more spending on defence
- It remained difficult to assess many of these risks because their likelihood and economic impact were difficult to quantify
- It was contended that the resilience of the euro area economy meant that it remained in relatively good shape
- However, it was also argued that growth had remained weak overall and vulnerable to several downside risks
- Members assessed that risks to economic growth had become more balanced
- Members welcomed the fact that inflation had now been hovering around 2% for a number of months
- Risks surrounding the inflation outlook were identified on both sides
- However, it was also contended that risks surrounding the inflation outlook were rather low since many of them had been partly defused
- Several members viewed inflation risks as tilted to the downside over the medium-term
- A few members viewed inflation risks as tilted to the upside over the medium-term
- But members concurred that the standard measures remained consistent with the 2% medium-term target
- It was argued that the current level of interest rates should be seen as sufficiently robust in managing shocks, in view of two-sided inflation risks
- Overall, there continued to be a high option value to waiting for more information
- Full accounts
The central bank meeting minutes are almost never a market-moving release given that it’s old data by the time they get released. In fact, there’s nothing here that we didn’t already know.
This article was written by Giuseppe Dellamotta at investinglive.com.