ECB Meeting Accounts: Large number of members thought high inflation called for faster policy normalisation

The accounts of the European Central Bank's March policy meeting, released on Thursday, said that a large number of the central bank's governing council members held the view that the current high level of inflation and its persistence called for immediate further steps towards monetary policy normalisation, reported Reuters. 

Additional Takeaways as summarised by Reuters

• Inflation was projected to remain above target in 2023 and it was argued that the baseline inflation projection for 2024 could be assessed to be already effectively on target.
• It was argued that, for all practical purposes, the three forward guidance conditions have been met.
• It was argued that even if the forward guidance criteria could be assessed as being met, uncertainty was high and a longer period of above-target inflation would lead to an increased risk of an upward unanchoring.
• In such circumstances, the governing council could no longer afford to look through higher inflation.
• The view was taken that Asset Purchase Programme (APP) purchases had by now fulfilled the stated objective.
• Some argued that it was no longer evident that the pace of net purchases previously agreed continued to be proportionate.
• It was nonetheless seen as wise to keep some two-sided optionality.

Market Reaction

The euro has been picking up in recent trade in wake of the hawkish leaning minutes. Statements such as "for all practical purposes, the three forward guidance conditions (for rate hikes) have been met" are likely to further spur ECB tightening bets.