MNI BRIEF: ECB Members See Rates At Neutral -Account

Some of European Central Bank Governing Council members pointed out that interest rates at 2.5% could no longer be at restrictive levels and pushed for a stronger change in language in the policy statement during March’s meeting, monetary policy accounts showed on Thursday.

Tt was also noted that 2.5% “was within, or at least at around the upper bound of, the range of the Eurosystem staff estimates for the natural interest rate”, the accounts showed, adding that regardless of the enormous uncertainties around the estimates “they still provided a guidepost for the degree of monetary policy restrictiveness”.(See MNI ECB WATCH: Cuts 25BP, Direction No Longer Clear)

Policymakers also saw risks that the expected expansionary fiscal policy in defence spending could risk the disinflationary process and trigger second-round effects if other risks materialise, but it was also noted that this could also lead to a persistent and significant increase in the neutral interest rate.