Accounts Flag Emphasis on Data Dependency

ECB publish accounts from their 26-27 July meeting, writing that:

• Members generally concurred that [inflation] developments had been broadly in line with the June Eurosystem staff projections.
• Risk of second-round effects leading to wage-price spirals seemed to be contained, [...] Nevertheless, caution was expressed that further inflation data for the coming months were required
• A preference was also initially expressed for not raising the key ECB interest rates in view of risks of stronger than anticipated transmission.
• Emphasis was put on the merit of sticking to a data-dependent, meeting-by-meeting approach
• Broad agreement prevailed that, ahead of its September meeting, the Governing Council should neither hint at further rate increases nor signal that it would pause in hiking rates or that it had reached the peak rate.

And on the economic outlook:

• View was expressed that the combination of no surprises in inflation and lower than expected growth prospects implied that the risks to inflation had become more balanced, if they had not already started to move to the downside.
• The outcome could also be one of “stagflation”.
• Evidence from the bank lending survey showed that credit demand from firms for business investment had declined and could be expected to decline further.