Excerpts from the Account of the monetary policy meeting of the Governing Council of the European Central Bank, held in Frankfurt am Main on Wednesday and Thursday, 6-7 September 2017:
While the recent appreciation of the euro exchange rate was seen to reflect to some degree the improved macroeconomic environment in the euro area and the associated market assessment of the outlook for the ECB’s monetary policy relative to that of other major central banks, concerns were expressed, notably about the recent momentum. There was wide agreement that the recent movements in the euro exchange rate represented a source of uncertainty, which required monitoring with respect to its medium-term implications for price stability.
Moreover, as the end of the intended horizon of the net asset purchases was approaching, members reiterated that a decision was warranted in the autumn on the ECB’s policy instruments beyond the end of the year. This decision would need to be based on a thorough assessment of the outlook for inflation, the risks surrounding this outlook, and the monetary policy stance and financial conditions needed for a sustained return of inflation rates towards levels below, but close to, 2%. Accordingly, the Eurosystem committees would continue their technical work on examining possible scenarios for the future evolution of policy instruments, considering their impact on financial conditions and the medium-term outlook for inflation and also looking at the experience of other central banks.
Subsequently members had a very preliminary exchange of views about the future monetary policy stance and the considerations that might guide a recalibration of instruments and the transmission channels through which they shape financial conditions and the outlook for price stability. There was broad agreement that continued substantial support from monetary policy was still needed to ensure a sustained return of inflation rates towards levels below, but close to, 2% over the medium term. At the same time, a stronger euro area economy and the dissipation of deflationary risks underpinned increased confidence that the Governing Council’s inflation aim would be achieved over the medium term.
A view was put forward that conditions were increasingly falling into place that would allow the intensity of monetary policy accommodation to be adapted and would provide an opportunity to scale back the Eurosystem’s net asset purchases.
Members also discussed some general trade-offs inherent in various scenarios for the future recalibration of the APP and, in particular, the choice between the pace and the intended duration. Within the framework of the Governing Council’s forward guidance, the benefits from a longer intended purchase horizon, combined with a greater reduction in the pace, were compared with those from a shorter period of purchases and larger monthly volumes. In this context, the point was again made that both the costs and benefits of extending APP purchases, including possible financial stability risks, needed to be taken into account.
As regards the timing of prospective policy decisions by the Governing Council, there was broad agreement that the bulk of the decisions, including the strategy for recalibrating the policy instruments, could be taken at the forthcoming monetary policy meeting in October, while the possibility that some technical decisions could be taken at a later stage could not be ruled out.