ECB accounts show policymakers keen to roll back stimulus
2022.04.07 15:11
FILE PHOTO: A symphony of light illuminates the south facade of the European Central Bank (ECB) headquarters in Frankfurt, Germany, December 30, 2021. REUTERS/Wolfgang Rattay
FRANKFURT (Reuters) – European Central Bank policymakers appeared keen to roll back stimulus at their March 10 meeting and argued that conditions for lifting rates had either been met or were about to be met, the accounts of the gathering showed on Thursday.
Policymakers agreed at the meeting to end bond buys sometime in the third quarter but made no further commitment to roll back stimulus, even as inflation continued to soar on high energy and food prices.
“A large number of members held the view that the current high level of inflation and its persistence called for immediate further steps towards monetary policy normalisation,” the accounts of the meeting showed.
“It was argued that, for all practical purposes, the three forward guidance conditions for an upward adjustment of the key ECB interest rates had either already been met or were very close to being met,” the ECB added.
The debate is likely to have moved on since the meeting, however, as inflation continues to beat expectations, hitting a record high 7.5% last month, with some analysts now talking about the possibility of double-digit readings by mid-year.
But the war in Ukraine is likely to complicate discussions. High fuel prices and sanctions will weigh on growth, and the 19-country euro zone economy is likely to stagnate at best in the first half of the year.
Conservative policymakers, or “hawks”, are nonetheless likely to push the ECB to set a more precise end-date for bond purchases, probably early in the third quarter, putting the bank in a position to raise interest rates by autumn if such a move is warranted then.
Markets are now pricing in a combined 60 basis points worth of rate hikes in the bank’s minus 0.5% deposit rate this year, even if no policymaker has made the case for such aggressive tightening.
The ECB will next meet on April 14 and a more detailed timeline for rolling back stimulus is possible.
