The minutes of the European Central Bank's (ECB) September 9-10 meeting revealed that the bank has maintained its cautious line in its monetary policy decisions. The impact of tensions in the Middle East on energy prices and inflation in the Eurozone reaching a three-year high stood out in the risk assessment of policymakers.
The minutes stated that there was a consensus among members that risks to the inflation outlook are tilted to the upside in an environment of extraordinary energy price volatility and uncertainty. It was reported that the ECB therefore preferred to use a “neutral” tone in its communication.
The bank does not want the interest rate hike decision taken in September to be perceived as part of a new, predetermined tightening cycle. The minutes also showed that the bank avoided sending a message that this step was the “final interest rate hike,” instead emphasizing “continued caution.”
ECB officials warned that if the energy shock deepens, its impact on the prices of other goods and wages could be stronger than expected. It was assessed that potential supply disruptions, low storage levels, and a cold winter scenario could push gas prices higher again.
High energy costs pushed inflation in the Eurozone to 3.8 percent in September, the highest level in the last three years. The ECB projects that headline inflation could remain significantly above the 2 percent target until the first half of 2027.
In the markets, the expectation that the ECB Governing Council will keep the policy rate steady at 2.50 percent at the meeting at the end of this month has gained weight. However, it is considered that a third interest rate hike this year could be on the agenda in December.
News Source: 12punto
