Following the ECB’s 25bps rate cut in September, the minutes reveal a cautious stance on future monetary easing, emphasizing the need to rely on a broader evaluation of data, rather than any single metric. While members agreed that further reductions in policy restrictiveness would depend on incoming data, they stressed that “data-dependence” should not be misinterpreted as “data point-dependence” , and mechanical response to short-term inflation figures.
The committee highlighted that a “gradual and cautious approach” remains appropriate, as uncertainties around inflation persist. Despite some signs of improvement, it is still too early to declare the inflation battle won. Concerns over upward revisions in core inflation projections and recent surprises in services inflation were also noted.
ECB emphasized that the “real test” of inflation stability would come in 2025, when the impact of wage growth and productivity gains would be clearer.
For now, markets expect another rate cut at the upcoming October meeting, with a follow-up move in December also largely anticipated.
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