ECB Minutes (Oct): 75bp supported by a "very large majority", a few members expressed a preference for 50bp

Rates:

• The proposal to raise the key ECB interest rates by 75 basis points was supported by a very large majority of members; it was argued that falling short of these market expectations would imply an unwelcome loosening impulse, potentially undermining confidence in the Governing Council’s commitment to price stability.


• A few members expressed a preference for increasing the key ECB interest rates by 50 basis points; it was argued that an overly aggressive pace of tightening could have repercussions for financial stability, economic activity and ultimately inflation.


• A discussion took place on the use of concepts such as the “neutral rate” or the “terminal rate” consistent with inflation returning to target over the medium term, with different views expressed on the link between these measures and projection scenarios or on their steady state properties.


• Moreover, the view was expressed that monetary tightening would probably need to continue after the monetary policy stance had been normalised and moved into broadly neutral territory.
  

Outlook

• Members widely agreed that the outlook for euro area economic activity had deteriorated since the September monetary policy meeting.


• It was argued that a technical recession was becoming the baseline scenario and the most likely outcome.


• It was argued that a shallow or technical recession was unlikely to keep inflation in check given its recent momentum.


• It was argued that, in the event of a shallow recession, the Governing Council should continue normalising and tightening monetary policy, whereas it might want to pause if there was a prolonged and deep recession, which would be likely to curb inflation to a larger extent.


• It was argued that, in many respects, the outlook was more benign than the September downside scenario. However, in the meantime, other downside risks had materialised.


• Members agreed that the risks to the inflation outlook were primarily on the upside.


• All members agreed that, in view of the current inflation outlook, it was appropriate to continue normalising monetary policy by withdrawing accommodation.


• Regarding the economic analysis, members broadly agreed with the assessment of the current economic situation in the euro area.

via ECB

24 Nov 2022 - 12:29- Fixed IncomeImportant- Source: ECB