FRANKFURT (Reuters) -European Central Bank policymakers appeared content with the drop in inflation when they met last month but argued for a gradual policy easing given stubborn price pressures, the accounts of their Sept. 12 policy meeting showed on Thursday.
The ECB cut interest rates last month and said it would keep an open mind about October but a long list of policymakers have already made the case for a follow-up move, suggesting that a cut next week was likely despite some lingering opposition.
The ECB’s account of the September meeting showed a more cautious mood, with the emphasis on the remaining hurdles towards stabilising inflation at the bank’s 2% target despite an increasingly bleak outlook for growth.
“Members broadly concurred that a gradual approach to dialling back restrictiveness would be appropriate if future data were in line with the baseline projections,” the ECB said in the accounts.
ING’s global head of macro said the minutes revealed an ECB “that is increasingly concerned about disappointing growth but still very reluctant to give the all-clear on inflation”.
The bank has cut interest rates twice already as inflation is now within striking distance of its 2% target and said that further easing is only a question of timing given weak growth, easing price pressures and slowing wage growth.
The bank next meets on Oct. 17 and a cut is almost fully priced in with a December move also firmly expected.
The debate at the September meeting seemed evenly balanced, with some policymakers already raising the risk of inflation coming in too low while others insisted it was “too early to declare victory” over high price growth.
“The baseline path to 2% depended critically on lower wage growth as well as on an acceleration of productivity growth towards rates not seen for many years and above historical averages,” the ECB said.
“Conversely, it was stressed that inflation had recently been declining somewhat faster than expected, and the risk of undershooting the target was now becoming non-negligible.”