ECB minutes highlight September as ideal time for policy re-evaluation

ECB’s July meeting accounts revealed that the upcoming September meeting is “widely seen as a good time to re-evaluate the level of monetary policy restriction,” with members emphasizing the importance of approaching that meeting with an “open mind.”

The data-dependent approach was reiterated, but with a clear message that this does not mean overemphasizing specific, single data points. Instead, the policy decisions should be guided by established elements of the reaction function.

As inflation is coming down “only gradually,” the Governing Council opted for a cautious stance during the July meeting, supporting a pause in rate cuts. This cautious approach was deemed necessary due to the “prevailing uncertainties” surrounding key economic factors such as wages, profits, productivity, and services inflation. These elements require further monitoring and assessment as new data becomes available to gain greater confidence in the inflation outlook.

By the September meeting, ECB will have access to extensive new data, including July and August inflation figures, second-quarter national account information covering compensation per employee, profits, and productivity, as well as updated monetary data and a new set of staff projections.

Full ECB Jul meeting accounts here.