In the accounts of July 15-16 monetary policy meeting, ECB warned that “recent positive market developments were not fully backed by economic data”. They might be based on “overly optimistic expectations” about the Next Generation EU recovery package, and progress on vaccine development.
“A highly accommodative monetary policy stance continued to be appropriate on account of the subdued medium-term outlook for price stability, characterised by inflation expectations standing near historical lows and significant economic slack. Careful monitoring was warranted while uncertainty about economic outlook remained elevated. Current monetary stance was seen as “adequate” and a “recalibration” was “not deemed necessary”
Looking ahead, additional information, including more hard data releases, new staff projections and news on fiscal measures, would become available by September. That would provide “more clarity regarding the medium-term inflation outlook”. “In any case, at its September meeting the Governing Council would be in a better position to reassess the monetary policy stance and its policy tools.”
