Accounts Largely Reflect Lagarde Presser, Few Surprises Evident

Full ECB Accounts release here.

On inflation:

• "December inflation data provided further evidence that the disinflationary process was well on track and in fact might be running faster than previously expected.
• "several headwinds were expected to increase inflation momentum again

On rates:

• "The current levels of the policy interest rates would make a substantial contribution to reaching that goal if maintained for a sufficiently long duration.
• "it was widely felt that the current market pricing of future interest rates was not a sign that markets did not understand the ECB’s reaction function. Instead, it appeared that markets simply expected inflation to be lower than foreseen in the December staff projections, notably for 2024.
• "There was broad consensus among members that it was premature to discuss rate cuts at the present meeting
• "risk of cutting policy rates too early was still seen as outweighing that of cutting rates too late.
• "financial markets were already pricing in a number of rate cuts in 2024, contributing to a loosening of both financial and financing conditions. However, it was also argued that such a loosening might be premature
• "members agreed that following a data-dependent rather than a calendar-based approach was important, in line with the elements of the reaction function that the Governing Council had communicated in 2023.