ECB: Winds of change - ANZ

The ECB minutes showed that officials discussed dropping the easing bias at its June meeting, adding “juice” to Draghi’s “reflation” speech last week, notes the analysis team at ANZ.

Key Quotes

“The minutes noted that “it was argued that the improved economic environment with vanishing tail risks, in principle, suggested also revisiting the easing bias with respect to the APP purchases”. However, “it was cautioned that even small and incremental changes in the communication could be misperceived as signalling a more fundamental change in policy direction”. Nonetheless, “while there were valid reasons at this juncture to retain the APP easing bias, it was noted that, as the economic expansion proceeded and if confidence in the inflation outlook improved further, the case for retaining the bias could be reviewed”.”

“Separately, Chief Economist Peter Praet said officials need “patience and persistence”, adding that “our mission is not yet accomplished”. Echoing a similar tone across the channel, BoE’s McCafferty (already a hawk) said he expects a couple rate rises over the years and that monetary policy has its “foot on the accelerator” He added that the BoE “may need to take a little stimulus away.”