ECB Minutes Suggest Policy Communication Script May Be Revised Soon
January 11 2018 - 4:42AM
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The European Central Bank could change the tone of its monetary
policy communication early this year to reflect the improvement in
growth prospects, minutes of the latest policy session showed on
Thursday.
"Looking ahead, the view was widely shared among members that
the Governing Council's communication would need to evolve
gradually, without a change in sequencing, if the economy continued
to expand and inflation converged further towards the Governing
Council's aim," the central bank said in the summary, which it
calls "account", of the December 13-14 policy session.
"The language pertaining to various dimensions of the monetary
policy stance and forward guidance could be revisited early in the
coming year."
The euro surged following the release of the minutes as a change
in the tone of the policy communication suggested that the bank was
planning to step up its efforts to wind down the massive
stimulus.
The ECB left its key interest rates, asset purchase plan and
forward guidance unchanged in the December meeting.
The minutes showed that the bank expects the forward guidance to
gain prominence, going forward.
"As progress was made towards a sustained adjustment in the path
of inflation, the relative importance of the forward guidance on
policy rates would increase," policymakers agreed to ECB Chief
Economist Peter Praet's view, the minutes showed.
Policymakers also agreed that the Governing Council's forward
guidance framework would evolve naturally, in line with the
established sequencing between the APP and interest rate guidance.
They want the policy communication to be adjusted gradually over
time to avoid sudden and unwarranted movements in financial
conditions.
ECB rate-setters also stressed that it was important to reflect
on "how to transition gradually from the present conditionality
focused on asset purchase programme net purchases to a broader
concept of forward guidance comprising various dimensions of the
monetary policy stance."
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