ECB Chief Economist Philip Lane said, “the red zone for everyone is if inflation became persistent at a number that’s immoderately above the inflation target. That’s a very far distance from where the euro area is.” He added, “we have to be the counterweight, honestly, in this debate.”

On inflation, he also said, “there’s solid reasons to believe that a lot of this is to do with the reopening of the economy and there’s very solid reasons to believe there’s a significant transitory component.”

In the accounts of ECB’s September 8-9 meeting, Governing Council members concurred with the assessment that “an accommodative monetary policy stance remained”. Also, “policy support from a sustained pace of net purchases under the PEPP, along with the other instruments and the recalibrated forward guidance, was deemed essential”.

Financing conditions had “had remained favourable or had loosened further” since June, and was “visible across a broad spectrum of indicators”. Inflation outlook had a “significant improvement over the course of the year”. However, the near-term increase in inflation was “largely driven by temporary factors that would fade in the medium term and not call for policy tightening.”

Regarding the reduction in PEPP purchase pace in Q4, on the one hand, it was argued that “a symmetric application of the PEPP framework would call for a more substantial reduction in the pace of purchases”. On the other hand, “reference was made to the recent repricing in nominal bond yields, which called for a prudent reduction in the pace of purchases”.

Also, it’s noted that “markets were already expecting an end to net asset purchases under the PEPP by March 2022”, but such expectation was “not showing a significant impact on financing conditions”.

Overall, all members agreed to “moderately scale down the pace of purchases under the PEPP”.

Full accounts here.

ECB Governing Council member Yannis Stournaras told Bloomberg TV that speculations for a first hike around mid-2023 are “not in accordance with our forward guidance”. He added that the central bank will try to avoid any disruption after the end of the PEPP.

“Asset purchases aim at favorable financing conditions, at smooth transition of monetary policy to prevent any kind of fragmentation in jurisdictions in the euro area,” Stournaras said. “I’m sure that the Governing Council will continue to aim at this.”

Stournaras also said Eurozone is “not in the same position” as the US on inflation. He said, “the inflation forecasts are lower for the euro zone than in the U.S. and in the U.K. It’s natural that we’re in a different phase of monetary policy.”

Separately, Governing Council member Francois Villeroy de Galhau said he expected inflation to fall back below 2% within a year.