MNI POLICY: ECB On Track For Autumn 2019 Hike, Minutes Show

ECB policymakers call for "patience, prudence and persistence"

By Luke Heighton

     LONDON (MNI) - European Central Bank minutes showed it on track for a rate

hike in September or October 2019, in an account of its July monetary policy

meeting which revealed few surprises but also concern over global trade

disputes.

     Following are key points from the minutes:

     -- Members "widely expressed satisfaction that the communication of the

June monetary policy decisions had been well understood by financial markets."

June's decision to keep interest rates on hold "at least until the summer of

2019" has prompted investors to factor in a hike in September or October of next

year. "This formulation was considered to have struck an appropriate balance

between being sufficiently precise to provide effective forward guidance and

maintaining a suitable degree of flexibility," the minutes said.

     -- Governing Council members agreed on the need for "patience, prudence and

persistence with regard to the conduct of monetary policy in the period ahead,"

and that "an ample degree of monetary accommodation would continue to be

provided by the net asset purchases until the end of 2018, by the sizeable stock

of acquired assets and the associated reinvestments, and by the enhanced forward

guidance." Members "unanimously agreed to maintain the current monetary policy

stance and to reconfirm all elements of the Governing Council's forward

guidance".

     -- Recent economic indicators and survey results "stabilised and confirmed

the scenario of solid and broad-based growth momentum," members said, despite

underlying price pressures building up "only gradually." The account noted that

"increasing support for the inflation outlook was seen to come from the ongoing

strengthening in wage growth, although it remained to be seen to what extent

wage inflation would translate into price inflation over time." It added:

"Impetus for this upward trend had come from stronger negotiated wage growth,

rather than wage drift, as had previously been the case. This shift to

negotiated wage growth as the main driver bolstered confidence that the pick-up

in wage growth would be sustained." Members also "broadly shared the view that

uncertainties surrounding the inflation outlook had been receding" while "it was

argued that uncertainties in the outlook for economic growth would not

necessarily translate into corresponding risks to the inflation outlook."

     -- Council members said uncertainties related to global factors have

"remained prominent. The risk of persistent heightened financial market

volatility continued to warrant monitoring" and members "expressed concerns

about the implications for emerging market economies and the recent depreciation

of their currencies, with developments in these economies discussed prominently

in the IMF's latest outlook for the global economy.

--MNI Frankfurt Bureau; +49-69-720-146; email: luke.heighton@marketnews.com

--MNI London Bureau; +44208-865-3829; email: Jason.Webb@marketnews.com

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