Accounts Release Shows Arguments Behind Step Down to 25bps Hike

ECB accounts for early May meeting, link here.

• Almost all members supported the 25 basis point rate rise as proposed by Mr Lane in combination with clear communication that, on the basis of the current data, monetary policy still had more ground to cover.
• This decision was seen as striking the right balance
• Raising rates by 25 basis points was seen as preferable, including from a risk management perspective
• It was concluded that reducing the size of the increment from 50 to 25 basis points could be justified for two main reasons. First, substantial ground had been covered thus far, Second, the smaller rate increase also reflected uncertainty about the impact of past decisions
• A number of members initially expressed a preference for increasing the key ECB interest rates by 50 basis points in view of the risks to the inflation outlook posed by continued upside inflation surprises and inflation projected to be above target over at least four years, as well as by the elevated risk of an unanchoring of inflation expectations.