The ECB decided to maintain a cautious stance by not changing rates, choosing to wait for more data confirming the disinflationary trend. This approach reflects the uncertainty about the speed of the return to the 2% inflation target and in the midst of Jackson Hole.
The recent minutes of the European Central Bank (ECB) reflect a unanimous consensus among its members on the need to keep interest rates unchanged during the July meeting. According to the documents, it was noted that the Governing Council opted for a patient stance, preferring to wait for the arrival of more data confirming progress in disinflation before taking new decisions.
At that meeting, the ECB decided to keep interest rates at 4.25%, in line with market expectations.s members agreed that, as inflation continues to decline gradually,a cautious monetary policy response was appropriate, justifying a pause in rate adjustment.
Despite progress in reducing inflation, domestic price pressures were noted to remain high, especially in the services sector. According to the minutess, headline inflation will likely remain above the 2% target well into 2025, suggesting that the final stretch of the disinflation process will be more challenging.
What the ECB Council said
The Council members considered that a prudent approach would allow for an eventual gradual reduction in interest rates in the future, especially if inflation proves more persistent than expected. However, they stressed that any easing of monetary restrictions must be carefully balanced to avoid negative impacts on the economy.
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Overall, the ECB reiterated its commitment to keeping interest rates at restrictive levels for as long as necessary to ensure that inflation returns to the 2% target over the medium term. Members also stressed the importance of not pre-committing to a specific interest rate path.given the uncertainty about the pace at which inflation could return to its target.
Looking ahead to the next meeting in September, it was agreed that this would be an opportune time to reassess the current level of monetary policy restriction, taking into account the most recent economic data.
Source: Ambito
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