ECB monetary policy meeting accounts: most recent information had broadly confirmed the March staff projections, thus increasing confidence that the disinflationary process was continuing

The European Central Bank released an account of its April 10-11 monetary policy meeting, at which its policymakers decided to leave the three key interest rates unchanged. It noted that:

• Important new data – including new staff projections – would be released ahead of the June meeting, allowing the Governing Council to make a more comprehensive assessment. 

• While progress had been seen, monitoring the triangle between wages, productivity growth and profits continued to be key. 

• It was seen as plausible that the Governing Council would be in a position to start easing monetary policy restriction at the June meeting if additional evidence received by then confirmed the medium-term inflation outlook embedded in the March projections.

• A few members felt sufficiently confident that the three elements of the Governing Council’s reaction function gave grounds for a reduction in the policy rates already at the present meeting. 

• Policy rates were seen as likely to remain in restrictive territory for some time, while the effects of the present restrictive policy stance would continue to be felt even after the start of the easing phase. 

• The reduction of the Eurosystem balance sheet was having a contractionary impact on the economy. 

• While there were currently no significant risks of inflation expectations becoming unanchored to the downside, such risks could emerge if the current weakness in growth persisted.

• The risk of undershooting the inflation target and eventually having to pay too high a price in terms of declining activity was now seen as being at least as high as the risk of acting too early and overshooting the target over the medium term.