ECB: Oct Meeting Accounts Confirm Two-Sided Views To Policy Outlook, No Rush

The accounts of the Oct 29-30 ECB meeting confirmed a Governing Council that isn't in an rush to adjust monetary policy, whilst there were two-sided views to policy re both being at the end of the rate cutting cycle but also the importance of remaining entirely open-minded to the possibility of a further cut. On balance it continues to justify the mild easing bias seen in markets. 

• High option value to waiting: “Overall, there continued to be a high option value to waiting for more information. Given all of this, the Governing Council was currently in a good place from a monetary policy point of view, though this should not be seen as a fixed place.”
• Non-committal communication: "With the outlook for inflation more uncertain than usual and with the risk of large inflation and growth shocks in both directions, it was important for the Governing Council to maintain full optionality for future meetings and to be agile in order to react quickly to the materialisation of risks or large shocks if necessary. Communication should therefore remain non-committal about future interest rate decisions."

Two-sided views: 

• “The view was expressed that the rate-cutting cycle had come to an end, since the current favourable outlook was likely to be maintained unless risks materialised. Taking a steady hand approach could increase the chances of remaining in a good place. According to this view, from a strategic perspective, provided inflation expectations remained firmly anchored, the monetary policy stance should not be fine-tuned in response to moderate and temporary fluctuations of inflation around target but should only be adjusted if a significant deviation from target was expected over the medium term.”
• “At the same time, the view was also expressed that it was important to remain entirely open-minded on the possible need for a further rate cut, and that such a move was likely to be warranted if there were an increase in the likelihood or intensity of downside risk factors, or if the projected undershooting of the inflation target became sustained. According to this view, the bar for policy action should not be seen as being any higher than normal.”