Highlights of the ECB Accounts

No real surprises (and hence no market reaction to the release) but a bit more colour on the decision below:

• "A range of model-based simulations suggested that a deposit facility rate in the region of 3.75% to 4.00%, so long as it was understood as being maintained for a sufficiently long duration, should be consistent with a return of inflation to target within the projection horizon."
• "In view of the uncertainty surrounding model-based simulations, expert surveys and market indicators, the choice between holding the deposit facility rate at 3.75% and moving to 4.00% was finely balanced. However, at the margin, it was safer to decide on an additional hike, given the highly uncertain environment and the significant disinflation that was still required to return to the inflation target in a timely manner."
• "An additional hike would reinforce progress towards the target for two basic reasons. First, if the economy evolved in line with the staff baseline case, the decision to hike would bolster confidence that inflation would return to target within the projection horizon. Second, a higher interest rate would more strongly limit the amplification of any upside shocks to the inflation path. In consequence, a more secure pace of disinflation and greater insurance against upside risks would also reinforce the anchoring of inflation expectations, which remained a precondition for the disinflation process to keep up its pace."