FAST FIVE: ECB Minutes: Here Are The Main Highlights
ECB Minutes: Here Are The Main Highlights One day after the FOMC minutes, we got the ECB's account of its latest March 10-11 Governing Council meeting which said that “the recent tightening of financing conditions was generally seen as premature for the euro area, which was still in a weaker cyclical position than the US” The ECB noted that higher real rates were not necessarily a cause for concern and should not trigger a policy intervention if they reflected higher growth prospects rather than higher real term premia.
It was underlined that the flexibility embodied in the PEPP was symmetric, implying that the purchase pace could be increased and decreased according to market conditions.
In the overall context of a holistic and multifaceted approach to evaluating financing conditions (spanning the entire transmission chain of monetary policy), developments in risk-free interest rates and sovereign yields were particularly relevant.
Moreover, the view was put forward that the tightening might not be sizeable and persistent enough to affect broader financing conditions materially.
Total PEPP envelope was not being called into question in the current conditions and that the pace of purchases could be reduced in the future “Although a better economic outlook in the US also entailed positive demand effects for the euro area, it was observed that the optimism prevailing on financial markets, reflected in 'reflation trades,' seemed not to be shared by businesses and households, which had generally maintained a cautious stance” “On the basis of the March staff projections, the euro area inflation and growth outlook had remained largely unchanged since the Governing Council's December meeting.