ECB Governing Council member Gabriel Makhlouf said, “To continue on our path to bring inflation back to our 2% target, I see a 50 basis-point increase in interest rates as the minimum needed at our December meeting.”

“We have to be open to policy rates moving into restrictive territory for a period,” the Irish central-bank chief said. “It is premature to be talking about the end-point for policy rates amid the prevailing levels of uncertainty.”

“The justification for the expansion of the balance sheet – too low inflation and the risk of deflation – has ended, and it is time to look at reducing its size,” he said.

In the accounts of ECB’s December 15-16 meeting, Governing Council members concurred that the “recent and projected near-term increase in inflation was driven largely by temporary factors that were expected to ease in the course of 2022. ” However, it was also “cautioned” that a “‘higher for longer’ inflation scenario could not be ruled out.”

Thus, ECB should “communicate clearly that it was ready to act if price pressures proved to be more persistent and inflation failed to fall below the target as quickly as the baseline projections foresaw.” On the other hand, concerns were also expressed about “premature scaling back of monetary stimulus and asset purchases.”

A “large majority” of members agreed with the policy changes, including scaling back the pace of PEPP purchases in Q1, extend the PEPP reinvestment horizon until at changes end of 2024, increase APP net purchases temporarily.

But some couldn’t support the overall package on some reservations on “recalibration of APP purchases and the extension of the minimum PEPP reinvestment period, as well as the statement about flexibility in future asset purchases beyond the confines of the specific circumstances of the present pandemic.”

Full meeting accounts here.