ECB Monetary Policy Meeting Accounts: PEPP envelope would likely have to be used in full to provide necessary accommodation

The ECB released account of its September 9-10 monetary policy meeting. It noted that:

• Recovery was asymmetric, being further advanced in manufacturing sector than in services sector;
• On the basis of the current information, PEPP envelope would likely have to be used in full to provide necessary accommodation to offset downward impact of pandemic on path of inflation;
• Point was made that pace of monthly purchases could be reduced as tensions in financial markets subsided;
• Further cuts in policy rates and changes to conditions of TLTROs are also part of the toolkit for providing additional monetary policy accommodation, if necessary;
• Recent appreciation of euro exchange rate had had a material impact on the inflation outlook in the September ECB staff projections;
• There was broad agreement among members that there was no room for complacency;
• There had been a marked appreciation of the euro exchange rate since July; while the appreciation to some extent reflected improvements in global risk sentiment, as well as euro area factors such as NGEU recovery plan, it also reflected developments in monetary conditions in euro area relative to the rest of the world;
• Market positioning remained tilted towards further euro appreciation, with net speculative US dollar positions against advanced economy currencies, including the euro, remaining sizeable;
• Inflation was expected to remain persistently low over the medium term, notwithstanding gradual pick-up over projection horizon;
• Underlying dynamics of the pandemic, developments in negotiations on post-transition Brexit arrangement, outcome of US presidential election and decisions on fiscal plans at individual country level as well as at euro area level had to be closely monitored.