Tone of ECB minutes raise hopes for further monetary policy action in Sept

At its July meeting, the ECB kept interest rates on hold and stopped short of signaling that it would boost its stimulus again soon. The main refinancing rate and the deposit rate remain at record lows of zero and minus 0.4 per cent. Mr. Draghi in the presser that followed has urged investors to wait to see the full effects of its recent policy measures, which include subzero interest rates, €80 billion ($90.18 billion) a month of bond purchases and cheap loans for banks.

The minutes from the ECB meeting July 20-21 showed general agreement among the ECB Governing Council on the outlook, risk and policy actions post-Brexit. Members felt it was too early to assess with any certainty the possible implications of UK referendum headwinds. Members therefore felt it was premature to discuss any possible monetary policy reaction at this stage.  Overall, the view was widely shared that the Governing Council needed to reiterate its capacity and readiness to act, if warranted.

Minutes noted that in the current environment of heightened uncertainty, a still high level of economic slack and weak wage and price pressures, future discussions were called for regarding wage trends, inflation expectations, the medium term orientation of monetary policy and the time horizon over which the very accommodative monetary policy stance would remain warranted.

ECB's next monetary policy meeting will take place on September 8 in Frankfurt and the tone of the remarks will raise hopes of an extension of the central bank’s €80bn-a-month quantitative easing programme beyond the current spring of 2017 deadline.