In the accounts of Oct 24-25 monetary policy meeting minutes, ECB acknowledged that “recent data and survey results had been generally somewhat weaker than expected”. However, the accounts also noted that incoming data were “still considered consistent with an ongoing broad-based expansion of the euro area economy” as embodied in September staff projections. The weaker growth momentum in 2018 “pointed to an economy that was growing more in line with potential”.
Nevertheless, the accounts also noted that weaker growth pattern in H2 “would have a mechanical impact, via the carry-over effect, on the estimate for annual growth in 2019”. Little information was currently available for Q4. “December 2018 Eurosystem staff projections, which would be available at the Governing Council’s next monetary policy meeting, would provide an occasion for a more in-depth assessment.”
On external risks ECB policymakers “considered that the uncertainties related to global factors remained prominent, and the risks related to the external environment were assessed to be tilted to the downside.” Risks include “rising protectionism, vulnerabilities in emerging markets and financial market volatility.” Also, the account noted that the limited impact from trade tensions was possible because “an adverse impact from trade tensions on more open economies was being offset by the presently more buoyant imports, particularly in the United States.”
On inflation, ECB policymakers consider “medium-term outlook for inflation, as contained in the September 2018 ECB staff projections, had been broadly confirmed.” The disappointing development in core inflation was “mainly due to services prices”. And, “it was recalled that there were a number of special factors underlying services price developments, which were mainly related to administered prices. An increase in underlying inflation for the euro area was to be expected when these base effects disappeared.
Overall, “members widely agreed that patience, prudence and persistence with regard to monetary policy remained warranted”.