ECB policymakers agreed that the underlying growth momentum in the euro area remained intact, though the uncertainty regarding the outlook has increased, the minutes of the European Central Bank’s April 25-26 rate-setting session showed Thursday.
“It was widely felt that uncertainty surrounding the outlook had increased and caution was seen as warranted in interpreting recent developments, also because the moderation in growth appeared to be broad-based across countries and sectors,” the minutes, which the ECB calls “account” revealed.
“A more pronounced weakening of demand, notably related to external factors, could therefore not be ruled out.”
In the late April session, the bank left its key interest rates, asset purchases and forward guidance unchanged.
The main refi rate is currently at a record low zero percent and the deposit rate at -0.40 percent.
Recent surveys showed that the euro area private sector grew at the slowest pace in 18 months in May. The Eurozone economic growth slowed in the first quarter and inflation eased in April to 1.2 percent.
Inflation continues to stay below the European Central Bank’s target of ‘below, but close to 2 percent’.
Rate-setters agreed that the euro area growth remained solid and broad-based, despite the moderation.
Such underlying strength supports policymakers’ confidence that Eurozone inflation would converge to the ECB target over the medium term.
“For underlying inflation pressures to continue to build up and support the path of headline inflation over the medium term, patience, persistence and prudence with regard to monetary policy remained warranted,” the bank reiterated.
During the April session, a policymaker suggested that inflation is close to the ECB’s target, but there was broad agreement in the Governing Council that “the evidence remained insufficient at the current stage.”
Regarding policy communication, members widely agreed that ” a steady hand with regard to monetary policy was warranted” for now.