ECB December meeting accounts: Large number of members expressed preference for 75 bps rate hike

A large number of members initially expressed a preference for increasing the key ECB interest rates by 75 basis points.
Raising interest rates by less than 75 basis points would send the wrong message and risk being perceived as inconsistent with the 2% inflation target, some argued.
Concern was therefore expressed as to how domestic demand would hold up.
A broad majority of members supported Mr Lane’s proposal to raise the key ECB interest rates by 50 basis points.
A smaller output gap would be more consistent with the observed strong dynamics of core inflation.
A compromise was in some ways seen as broadly equivalent to raising rates by 75 basis points at the present meeting.
The steadiness of rate hikes and the time over which interest rates remained in restrictive territory mattered more.
The recent strengthening of the Euro constituted a noteworthy change in the external environment and would likely imply somewhat lower inflationary pressures for the euro area in the period ahead.
An increase of 50 basis points at the current meeting would allow the governing council to tighten monetary policy over a longer period.
The current projection for 2025 could therefore be seen as not significantly different from 2%.
It was also felt that the risks to the baseline inflation projections could be assessed as more balanced in the medium run.
Some held out for 75 bps.
Some members expressed a preference for reducing the APP portfolio at a faster pace.
Members, overall, assessed that the risks to the inflation outlook were primarily on the upside.
A reversal of this downward shift in market pricing was called for.