The accounts of the European Central Bank's (ECB) September policy meeting revealed on Thursday policymakers saw that euro depreciation could add to inflationary pressure for the euro area.
Key takeaways as summarized by Reuters
"Inflation was far too high and likely to stay above the governing council’s target for an extended period."
"Inflation expectations were still anchored and wage growth remained moderate, with little evidence of second-round effects."
"Risks surrounding the projected inflation path remained tilted to the upside over the entire projection horizon."
"The size of the upward revision in the staff inflation projection for 2024 was not seen as sufficiently large as to require a more aggressive response."
"Expected weakening in economic activity would not be sufficient to reduce inflation to a significant extent."
"A response that was too aggressive could also exacerbate a recession, with few benefits for inflation in the short term."
"Some members expressed a preference for increasing the key ecb interest rates by 50 basis points. while a 25 basis point increase was seen as clearly insufficient."
"Acting forcefully now could avoid the need to increase interest rates more sharply later."
"It was argued that policy would remain expansionary after a 75 basis point rate hike."
"A very large number of members expressed a preference for raising the key ECB interest rates by 75 basis points."
"Without a timely reduction in monetary policy accommodation, inflationary pressures resulting from a depreciation of the euro might increase."
"Acting forcefully now could avoid the need to increase interest rates more sharply later in the economic cycle when the economy was slowing."
"Expected decline in inflation towards the end of the projection horizon was therefore seen to be surrounded by a higher than usual degree of uncertainty."
Market reaction
EUR/USD edged slightly lower with the initial reaction and was last seen losing 0.1% on the day at 0.9875.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD climbs to 10-day highs above 1.0700
EUR/USD gained traction and rose to its highest level in over a week above 1.0700 in the American session on Tuesday. The renewed US Dollar weakness following the disappointing PMI data helps the pair stretch higher.
GBP/USD extends recovery beyond 1.2400 on broad USD weakness
GBP/USD gathered bullish momentum and extended its daily rebound toward 1.2450 in the second half of the day. The US Dollar came under heavy selling pressure after weaker-than-forecast PMI data and fueled the pair's rally.
Gold struggles around $2,325 despite broad US Dollar’s weakness
Gold reversed its direction and rose to the $2,320 area, erasing a large portion of its daily losses in the process. The benchmark 10-year US Treasury bond yield stays in the red below 4.6% following the weak US PMI data and supports XAU/USD.
Here’s why Ondo price hit new ATH amid bearish market outlook Premium
Ondo price shows no signs of slowing down after setting up an all-time high (ATH) at $1.05 on March 31. This development is likely to be followed by a correction and ATH but not necessarily in that order.
Germany’s economic come back
Germany is the sick man of Europe no more. Thanks to its service sector, it now appears that it will exit recession, and the economic future could be bright. The PMI data for April surprised on the upside for Germany, led by the service sector.