ECB Monetary Policy Meeting Accounts: Governing Council will maintain accommodative monetary policy for as long as necessary and see no risk of overheating in euro area in present environment

The ECB released account of its March 10-11 monetary policy meeting. It noted that:

• It was observed that increase in bond yields occurred mostly on account of higher expected inflation and better outlook for global economy. In this context, it was remarked that the Governing Council needed to avoid giving the impression of being overly focused on sovereign yields or reacting mechanically to a set of indicators of financing conditions
• There was wide agreement that PEPP purchase pace needed to take into account a joint assessment of favourability of current financing conditions and the inflation outlook
• There was a broad consensus on understanding that total PEPP envelope was not being called into question in current conditions and that the pace of purchases could be reduced in future. In this context, flexibility of purchases over time was seen as essential for reacting to changes in financing conditions as needed over time
• PEPP envelope could, however, be recalibrated if required in order to maintain favourable financing conditions to help counter the negative pandemic shock to path of inflation
• If favourable financing conditions could be maintained with asset purchase flows that did not exhaust the envelope over the net purchase horizon of PEPP, the envelope need not be used in full
• It was underlined that flexibility embodied in PEPP was symmetric, implying that the purchase pace could be increased and decreased according to market conditions
• Members agreed that the Governing Council would undertake a quarterly joint assessment of financing conditions and inflation outlook in order to determine the pace of purchases needed to keep financing conditions favourable
• Governing Council reiterated its commitment to stand ready to adjust all of its instruments, as appropriate, to ensure that inflation moved towards its aim in sustained manner, in line with its commitment to symmetry
• It was important to provide reassurance that Governing Council would maintain accommodative monetary policy for as long as necessary and saw no risk of overheating in euro area in present environment
• It was deemed important to emphasise the need for continued support from fiscal policies to sustain the recovery