ECB Monetary Policy Meeting Accounts: It was noted that near-term increase in inflation was largely driven by temporary factors that would fade in medium term and not call for policy tightening

The ECB released account of its September 8-9 monetary policy meeting. It noted that:

• As for assessment of inflation outlook, significant improvement over the course of the year was acknowledged
• It was noted that near-term increase in inflation was largely driven by temporary factors that would fade in medium term and not call for policy tightening
• According to September ECB staff projections, inflation was not expected to persistently reach levels that fully offset the pandemic impact on inflation path at relevant medium-term horizon
• Members agreed that persistently favourable financing conditions along with somewhat improved medium-term outlook for inflation would allow the Governing Council to moderately scale down the pace of purchases under the PEPP while confirming all other monetary policy measures
• A concern was expressed that slower pace might induce market perceptions of tighter than expected monetary policy, which could result in tightening of financing conditions
• An argument was made that markets were already expecting end to net asset purchases under PEPP by March 2022
• The point was made that, even without PEPP, overall monetary policy stance remained highly accommodative
• A view was expressed, however, that perception of premature removal of accommodation could raise questions on the Governing Council’s determination to deliver on its inflation target
• Attention was also drawn to the Governing Council’s efforts to be more transparent and to communicate better with the general public; it was suggested that more information be provided in official communication about reasoning behind the APP, the PEPP and related policy decisions