European Central Bank minutes show it is less likely to loosen policy, but cautious towards talk of tightening

Jasper Jolly
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ECB president Mario Draghi adopted a more hawkish tone (Source: Getty)

Top economists at the European Central Bank (ECB) said they were becoming less likely to continue loose monetary policy, according to minutes from the latest monetary policy meeting.

The minutes said the central bank was “less likely” to opt for “further accommodation” because of the strengthening of the European economy.

The minutes also revealed the central bank’s policymakers will only adjust their guidance on changes in a “very gradual and cautious manner” because of the sensitivity of markets to bankers’ every word.

Read more: ECB will hold monetary policy, but listen to what Mario Draghi doesn't say

The central bank’s governor, Mario Draghi, adopted a slightly more hawkish tone at its last monetary policy announcement on 27 April, taking account the recent improvement across Europe’s economy.

Draghi said the risks on its decision were "moving towards a more balanced configuration", as core inflation begins to rise.

The central bank has remained firm in its intention to keep interest rates as low as possible until inflationary pressures start to pick up “sustainably”.

Core inflation jumped in April from 0.7 per cent to 1.2 per cent, while the headline rate increased to 1.9 per cent, just below the two per cent target the ECB is mandated to target.

Read more: Eurozone inflation slowdown dampens prospects of tighter monetary policy

Any sustainable rise in inflation above two per cent would prompt a serious look at tightening monetary policy. The ECB's main refinancing rate, at which it lends money to banks, has remained at zero per cent since March 2016.

Meanwhile, in April the pace of asset purchases fell to €60bn per month. The quantitative easing programme is set to continue until at least December, unless the ECB changes course before then.

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