ECB Governing Council member Francois Villeroy de Galhau told BFM Business radio that yesterday’s 50bps sent a “signal of confidence that is strong and dual” to the public.

“It reflects both confidence in our anti-inflation strategy and confidence in the solidity of European and French banks,” he said.

Regarding recent banking crisis, Villeroy, also the Bank of France Governor, noted that “French and European banks are very solid,” and they are “not in the same situation as US banks”.

ECB had the “tools to ensure the liquidity of banks”, but according to him, it’s unlikely that they have to be used.

In the accounts of July monetary policy meeting, ECB noted that “members considered that the risks surrounding the euro area growth outlook could still be assessed as broadly balanced”. Though, there are uncertainties related to global factors “notably the threat of protectionism.”. Also, “risk of persistent heightened financial market volatility also continued to warrant monitoring.”

On inflation, there was “broad agreement” on chief economist Peter Praet’s assessment. Annual HICP inflation rose to 2.0% in June. And, “on the basis of current futures prices for oil, annual rates of headline inflation were likely to hover around the current level for the remainder of the year”. Muted underlying inflation “had been increasing from earlier lows”. Also, there was “increasing support” for domestic cost pressures from “ongoing strengthening in wage growth”. Beside, “members broadly shared the view that uncertainties surrounding the inflation outlook had been receding.”

Regarding communications, “members widely expressed satisfaction that the communication of the June monetary policy decisions had been well understood by financial markets.” And, the “enhanced forward guidance on the future path of policy rates had been effective in aligning market views”. That is, ECB interest rates would remain at current levels “at least through the summer of 2019”. It “struck an appropriate balance” between precision and flexibility and “was remarked that the Governing Council’s expectation was probabilistic in nature.”

Full ECB meeting accounts here.

ECB Governing Council member Peter Kazimir offered two distinct pathways for the central bank’s next move, strongly advocating for a 25 bps rate hike in the upcoming meeting next week.

Kazimir laid out the two scenarios: either to pause during the September meeting and opt for a “hopefully final” hike in October or December, or to proceed with a 25 basis point increase immediately, and “take a breather thereafter.”

“The second option seems preferable, reasonable, to me,” Kazimir emphatically stated. According to him, taking the latter route would be a “more straight forward and efficient solution,” providing the markets with clearer signals. Furthermore, it would allow policymakers additional time to confirm that inflation is moving towards the 2% target in a sustainable manner.

Kazimir’s recommendation comes at a time when there are increasing uncertainties surrounding the economic outlook. He acknowledged that “forecasts for inflation and economic growth are yet to be updated,” but insisted on taking pre-emptive action. “It is, therefore, necessary to take one more step. As they say, better to be safe than sorry,” he remarked.

In an interview with Financial Times, ECB Governing Council member Pierre Wunsch mentioned that the central bank is waiting for both wage growth and core inflation to decrease in conjunction with headline inflation before considering a pause.

Wunsch stated, “I would not be surprised if we had to go to 4 percent at some point.” He emphasized that ECB aims for a soft landing, and “nobody is going to err on the side of destroying the economy for the sake of destroying the economy.”

“But I have absolutely no indication that what we are doing (on interest rates) is too much,” he added.

Regarding rate hikes, Wunsch clarified, “I’m not a fetishist. I’m not going to hike rates even in a recession just because we have 2.3 percent or 2.1 percent inflation in the two-year forecast. But I’m not seeing inflation numbers going in the right direction yet.”

He also pointed out that if wage agreements persist around a 5 percent growth for an extended period, inflation may not return to 2 percent on a structural basis.